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Free tax filing for state 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. Free tax filing for state A pension is generally a series of payments made to you after you retire from work. Free tax filing for state Pension payments are made regularly and are for past services with an employer. Free tax filing for state An annuity is a series of payments under a contract. Free tax filing for state You can buy the contract alone or you can buy it with the help of your employer. Free tax filing for state Annuity payments are made regularly for more than one full year. Free tax filing for state Note. Free tax filing for state Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. Free tax filing for state Types of pensions and annuities. Free tax filing for state   Particular types of pensions and annuities include: Fixed period annuities. Free tax filing for state You receive definite amounts at regular intervals for a definite length of time. Free tax filing for state Annuities for a single life. Free tax filing for state You receive definite amounts at regular intervals for life. Free tax filing for state The payments end at death. Free tax filing for state Joint and survivor annuities. Free tax filing for state The first annuitant receives a definite amount at regular intervals for life. Free tax filing for state After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Free tax filing for state The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Free tax filing for state Variable annuities. Free tax filing for state You receive payments that may vary in amount for a definite length of time or for life. Free tax filing for state The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. Free tax filing for state Disability pensions. Free tax filing for state You are under minimum retirement age and receive payments because you retired on disability. Free tax filing for state 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. Free tax filing for state If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. Free tax filing for state 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. Free tax filing for state This plan must meet Internal Revenue Code requirements. Free tax filing for state It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. Free tax filing for state However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. Free tax filing for state A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Free tax filing for state A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. Free tax filing for state   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. Free tax filing for state A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. Free tax filing for state It does not qualify for most of the tax benefits of a qualified plan. Free tax filing for state Annuity worksheets. Free tax filing for state   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. Free tax filing for state Request for a ruling. Free tax filing for state   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. Free tax filing for state This is treated as a request for a ruling. Free tax filing for state See Requesting a Ruling on Taxation of Annuity near the end of this publication. Free tax filing for state Withholding tax and estimated tax. Free tax filing for state   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. Free tax filing for state 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. Free tax filing for state 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. Free tax filing for state 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). Free tax filing for state These payments are also known as amounts received as an annuity. Free tax filing for state 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. Free tax filing for state In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. Free tax filing for state The amount of each payment that is more than the part that represents your net cost is taxable. Free tax filing for state 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. Free tax filing for state These terms are explained in the following discussions. Free tax filing for state 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. Free tax filing for state First, find your net cost of the contract as of the annuity starting date (defined later). Free tax filing for state To find this amount, you must first figure the total premiums, contributions, or other amounts paid. Free tax filing for state This includes the amounts your employer contributed if you were required to include these amounts in income. Free tax filing for state It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). Free tax filing for state 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. Free tax filing for state Any additional premiums paid for double indemnity or disability benefits. Free tax filing for state Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). Free tax filing for state 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. Free tax filing for state Example. Free tax filing for state 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. Free tax filing for state The annuity starting date is July 1. Free tax filing for state This is the date you use in figuring your investment in the contract and your expected return (discussed later). Free tax filing for state Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. Free tax filing for state Foreign employment. Free tax filing for state   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. Free tax filing for state 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. Free tax filing for state Foreign employment contributions while a nonresident alien. Free tax filing for state   In determining your cost, special rules apply if you are a U. Free tax filing for state S. Free tax filing for state citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. Free tax filing for state 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. Free tax filing for state Death benefit exclusion. Free tax filing for state   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. Free tax filing for state The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. Free tax filing for state How to adjust your total cost. Free tax filing for state   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. Free tax filing for state Add it to the cost or unrecovered cost of the annuity at the annuity starting date. Free tax filing for state See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. Free tax filing for state Net cost. Free tax filing for state   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. Free tax filing for state This is the unrecovered investment in the contract as of the annuity starting date. Free tax filing for state If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. Free tax filing for state Refund feature. Free tax filing for state   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. Free tax filing for state 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. Free tax filing for state   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. Free tax filing for state Zero value of refund feature. Free tax filing for state   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. Free tax filing for state   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). Free tax filing for state   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. Free tax filing for state Examples. Free tax filing for state The first example shows how to figure the value of the refund feature when there is only one beneficiary. Free tax filing for state 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. Free tax filing for state In both examples, the taxpayer elects to use Tables V through VIII. Free tax filing for state 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. Free tax filing for state Example 1. Free tax filing for state At age 65, Barbara bought for $21,053 an annuity with a refund feature. Free tax filing for state She will get $100 a month for life. Free tax filing for state 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. Free tax filing for state In this case, the contract cost and the total guaranteed return are the same ($21,053). Free tax filing for state 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. Free tax filing for state 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. Free tax filing for state 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). Free tax filing for state 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. Free tax filing for state Example 2. Free tax filing for state John died while still employed. Free tax filing for state His widow, Eleanor, age 48, receives $171 a month for the rest of her life. Free tax filing for state John's son, Elmer, age 9, receives $50 a month until he reaches age 18. Free tax filing for state John's contributions to the retirement fund totaled $7,559. Free tax filing for state 45, with interest on those contributions of $1,602. Free tax filing for state 53. Free tax filing for state The guarantee or total refund feature of the contract is $9,161. Free tax filing for state 98 ($7,559. Free tax filing for state 45 plus $1,602. Free tax filing for state 53). Free tax filing for state 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. Free tax filing for state 9 $71,614. Free tax filing for state 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. Free tax filing for state 0 5,400. Free tax filing for state 00   3) Total expected return   $77,014. Free tax filing for state 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. Free tax filing for state 45   2) Guaranteed amount (contributions of $7,559. Free tax filing for state 45 plus interest of $1,602. Free tax filing for state 53) $9,161. Free tax filing for state 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. Free tax filing for state 00   4) Net guaranteed amount $3,761. Free tax filing for state 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. Free tax filing for state 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. Free tax filing for state 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. Free tax filing for state See the discussion of expected return, later in this publication. Free tax filing for state Free IRS help. Free tax filing for state   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. Free tax filing for state Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Free tax filing for state The following discussions explain how to figure the expected return with each type of annuity. Free tax filing for state A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. Free tax filing for state Fixed period annuity. Free tax filing for state   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. Free tax filing for state It is the total amount you will get beginning at the annuity starting date. Free tax filing for state You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). Free tax filing for state 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. Free tax filing for state Single life annuity. Free tax filing for state   If you are to get annuity payments for the rest of your life, find your expected return as follows. Free tax filing for state You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. Free tax filing for state These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). Free tax filing for state   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. Free tax filing for state See Adjustments to Tables I, II, V, VI, and VIA following Table I. Free tax filing for state Example. Free tax filing for state Henry bought an annuity contract that will give him an annuity of $500 a month for his life. Free tax filing for state 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. Free tax filing for state 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. Free tax filing for state 2 multiple by +. Free tax filing for state 1. Free tax filing for state His expected return would then be $115,800 ($6,000 × 19. Free tax filing for state 3). Free tax filing for state Annuity for shorter of life or specified period. Free tax filing for state   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. Free tax filing for state To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. Free tax filing for state 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. Free tax filing for state Example. Free tax filing for state Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. Free tax filing for state She was age 65 at her birthday nearest the annuity starting date. Free tax filing for state 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. Free tax filing for state 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. Free tax filing for state See Special Elections, later. Free tax filing for state Joint and survivor annuities. Free tax filing for state   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. Free tax filing for state To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. Free tax filing for state If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. Free tax filing for state See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. Free tax filing for state Example. Free tax filing for state 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. Free tax filing for state At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. Free tax filing for state The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. Free tax filing for state 0 Expected return $132,000 Different payments to survivor. Free tax filing for state   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. Free tax filing for state Example 1. Free tax filing for state 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. Free tax filing for state 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. Free tax filing for state 0 Multiple for Gerald, age 70 (from Table V)   16. Free tax filing for state 0 Difference: Multiple applicable to Mary   6. Free tax filing for state 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. Free tax filing for state 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. Free tax filing for state 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. Free tax filing for state Your husband died while still employed. Free tax filing for state 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. Free tax filing for state Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. Free tax filing for state You were 50 years old at the annuity starting date. Free tax filing for state Marie was 16 and Jean was 14. Free tax filing for state 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. Free tax filing for state 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. Free tax filing for state 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. Free tax filing for state 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. Free tax filing for state Computation Under the General Rule Note. Free tax filing for state Variable annuities use a different computation for determining the exclusion amounts. Free tax filing for state See Variable annuities later. Free tax filing for state Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. Free tax filing for state   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. Free tax filing for state See Death benefit exclusion , earlier. Free tax filing for state Step 2. Free tax filing for state   Figure your expected return. Free tax filing for state Step 3. Free tax filing for state   Divide Step 1 by Step 2 and round to three decimal places. Free tax filing for state This will give you the exclusion percentage. Free tax filing for state Step 4. Free tax filing for state   Multiply the exclusion percentage by the first regular periodic payment. Free tax filing for state The result is the tax-free part of each pension or annuity payment. Free tax filing for state   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. Free tax filing for state 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. Free tax filing for state   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. Free tax filing for state Step 5. Free tax filing for state   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. Free tax filing for state This will give you the tax-free part of the total payment for the year. Free tax filing for state    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. Free tax filing for state This fractional amount is multiplied by your exclusion percentage to get the tax-free part. Free tax filing for state Step 6. Free tax filing for state   Subtract the tax-free part from the total payment you received. Free tax filing for state The rest is the taxable part of your pension or annuity. Free tax filing for state Example 1. Free tax filing for state You purchased an annuity with an investment in the contract of $10,800. Free tax filing for state Under its terms, the annuity will pay you $100 a month for life. Free tax filing for state The multiple for your age (age 65) is 20. Free tax filing for state 0 as shown in Table V. Free tax filing for state Your expected return is $24,000 (20 × 12 × $100). Free tax filing for state Your cost of $10,800, divided by your expected return of $24,000, equals 45. Free tax filing for state 0%. Free tax filing for state This is the percentage you will not have to include in income. Free tax filing for state 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. Free tax filing for state If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). Free tax filing for state Example 2. Free tax filing for state Gerald bought a joint and survivor annuity. Free tax filing for state Gerald's investment in the contract is $62,712 and the expected return is $121,200. Free tax filing for state The exclusion percentage is 51. Free tax filing for state 7% ($62,712 ÷ $121,200). Free tax filing for state Gerald will receive $500 a month ($6,000 a year). Free tax filing for state Each year, until his net cost is recovered, $3,102 (51. Free tax filing for state 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. Free tax filing for state If Gerald dies, his wife will receive $350 a month ($4,200 a year). Free tax filing for state If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. Free tax filing for state 7%). Free tax filing for state Each year, until the entire net cost is recovered, his wife will receive $2,171. Free tax filing for state 40 (51. Free tax filing for state 7% of her payments received of $4,200) tax free. Free tax filing for state She will include $2,028. Free tax filing for state 60 ($4,200 − $2,171. Free tax filing for state 40) in her income tax return. Free tax filing for state Example 3. Free tax filing for state 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. Free tax filing for state Your two daughters each receive annual annuities of $1,800 until they reach age 18. Free tax filing for state Your husband contributed $25,576 to the plan. Free tax filing for state You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. Free tax filing for state 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. Free tax filing for state The exclusion percentage of 18. Free tax filing for state 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. Free tax filing for state Each full year $864 (18. Free tax filing for state 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. Free tax filing for state Each year, until age 18, $324 (18. Free tax filing for state 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. Free tax filing for state Part-year payments. Free tax filing for state   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. Free tax filing for state   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. Free tax filing for state 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. Free tax filing for state   If you received a fractional payment, follow Step 5, discussed earlier. Free tax filing for state This gives you the tax-free part of your total payment. Free tax filing for state Example. Free tax filing for state On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Free tax filing for state The applicable multiple from Table V is 23. Free tax filing for state 3 (age 61). Free tax filing for state Her expected return is $34,950 ($125 × 12 × 23. Free tax filing for state 3). Free tax filing for state Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. Free tax filing for state 1%. Free tax filing for state Each payment received will consist of 63. Free tax filing for state 1% return of cost and 36. Free tax filing for state 9% taxable income, until her net cost of the contract is fully recovered. Free tax filing for state During the first year, Mary received three payments of $125, or $375, of which $236. Free tax filing for state 63 (63. Free tax filing for state 1% × $375) is a return of cost. Free tax filing for state The remaining $138. Free tax filing for state 37 is included in income. Free tax filing for state Increase in annuity payments. Free tax filing for state   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. Free tax filing for state All increases in the installment payments are fully taxable. Free tax filing for state   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. Free tax filing for state 72-5(a)(5) of the regulations. Free tax filing for state Example. Free tax filing for state Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. Free tax filing for state In figuring the taxable part, Joe elects to use Tables V through VIII. Free tax filing for state The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. Free tax filing for state His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. Free tax filing for state 0 × $1,764 annual payment). Free tax filing for state The exclusion percentage is $7,938 ÷ $35,280, or 22. Free tax filing for state 5%. Free tax filing for state During the year he received 11 monthly payments of $147, or $1,617. Free tax filing for state Of this amount, 22. Free tax filing for state 5% × $147 × 11 ($363. Free tax filing for state 83) is tax free as a return of cost and the balance of $1,253. Free tax filing for state 17 is taxable. Free tax filing for state Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). Free tax filing for state The tax-free part is still only 22. Free tax filing for state 5% of the annuity payments as of the annuity starting date (22. Free tax filing for state 5% × $147 × 12 = $396. Free tax filing for state 90 for a full year). Free tax filing for state The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. Free tax filing for state Variable annuities. Free tax filing for state   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. Free tax filing for state   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. Free tax filing for state If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. Free tax filing for state Example. Free tax filing for state Frank purchased a variable annuity at age 65. Free tax filing for state The total cost of the contract was $12,000. Free tax filing for state The annuity starting date is January 1 of the year of purchase. Free tax filing for state His annuity will be paid, starting July 1, in variable annual installments for his life. Free tax filing for state 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. Free tax filing for state   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. Free tax filing for state 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. Free tax filing for state The result is added to the previously figured periodic tax-free part. Free tax filing for state The sum is the amount of each future payment that will be tax free. Free tax filing for state Example. Free tax filing for state 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. Free tax filing for state Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. Free tax filing for state 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. Free tax filing for state 00 Amount received in second year 500. Free tax filing for state 00 Difference $100. Free tax filing for state 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. Free tax filing for state 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. Free tax filing for state 4) $5. Free tax filing for state 43 Revised annual tax-free part for third and later years ($600 + $5. Free tax filing for state 43) $605. Free tax filing for state 43 Amount taxable in third year ($1,200 − $605. Free tax filing for state 43) $594. Free tax filing for state 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. Free tax filing for state 72–4(d)(3) of the Income Tax Regulations. Free tax filing for state The statement must also show the following information: The annuity starting date and your age on that date. Free tax filing for state The first day of the first period for which you received an annuity payment in the current year. Free tax filing for state Your investment in the contract as originally figured. Free tax filing for state 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. Free tax filing for state Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. Free tax filing for state Exclusion limited to net cost. Free tax filing for state   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). Free tax filing for state This is the unrecovered investment in the contract as of the annuity starting date. Free tax filing for state   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. Free tax filing for state This deduction is not subject to the 2%-of-adjusted-gross-income limit. Free tax filing for state Example 1. Free tax filing for state Your annuity starting date is after 1986. Free tax filing for state Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. Free tax filing for state There is no refund feature. Free tax filing for state Your monthly annuity payment is $833. Free tax filing for state 33. Free tax filing for state Your exclusion ratio is 12% and you exclude $100 a month. Free tax filing for state Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. Free tax filing for state Thereafter, your annuity payments are fully taxable. Free tax filing for state Example 2. Free tax filing for state 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. Free tax filing for state The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. Free tax filing for state The exclusion ratio is 10. Free tax filing for state 8%, and your monthly exclusion is $90. Free tax filing for state After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). Free tax filing for state 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. Free tax filing for state Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. Free tax filing for state Exclusion not limited to net cost. Free tax filing for state   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. Free tax filing for state If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. Free tax filing for state The total exclusion may be more than your investment in the contract. Free tax filing for state 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. Free tax filing for state 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. Free tax filing for state These tables correspond to the old Tables I through IV. Free tax filing for state In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. Free tax filing for state If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. Free tax filing for state 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). Free tax filing for state 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. Free tax filing for state Contributions made both before July 1986 and after June 1986. Free tax filing for state   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. Free tax filing for state (See the examples below. Free tax filing for state )    Making the election. Free tax filing for state 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. Free tax filing for state 72–6 of the Income Tax Regulations. Free tax filing for state ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. Free tax filing for state   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. Free tax filing for state 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. Free tax filing for state    Advantages of election. Free tax filing for state 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. Free tax filing for state    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. Free tax filing for state 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. Free tax filing for state   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. Free tax filing for state Example 1. Free tax filing for state Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. Free tax filing for state Payment of the $42,000 contribution is guaranteed under a refund feature. Free tax filing for state Bill is 55 years old as of the annuity starting date. Free tax filing for state 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. Free tax filing for state       Pre- July 1986   Post- June 1986 A. Free tax filing for state 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. Free tax filing for state 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. Free tax filing for state 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. Free tax filing for state Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. Free tax filing for state 7   28. Free tax filing for state 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. Free tax filing for state Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . Free tax filing for state 079   . Free tax filing for state 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). Free tax filing for state The taxable part of his annuity is $22,080 ($24,000 minus $1,920). Free tax filing for state 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). Free tax filing for state Example 2. Free tax filing for state Al is age 62 at his nearest birthday to the annuity starting date. Free tax filing for state Al's wife is age 60 at her nearest birthday to the annuity starting date. Free tax filing for state 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. Free tax filing for state The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. Free tax filing for state Al makes the election described in Example 1 . Free tax filing for state For purposes of this example, assume the refund feature adjustment is zero. Free tax filing for state If an adjustment is required, IRS will figure the amount. Free tax filing for state See Requesting a Ruling on Taxation of Annuity near the end of this publication. Free tax filing for state       Pre-  July 1986   Post-  June 1986 A. Free tax filing for state 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. Free tax filing for state 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. Free tax filing for state Expected return         1) Multiple for both annuitants from Tables II and VI 25. Free tax filing for state 4   28. Free tax filing for state 8   2) Multiple for first annuitant from Tables I and V 16. Free tax filing for state 9   22. Free tax filing for state 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. Free tax filing for state 5   6. Free tax filing for state 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. Free tax filing for state Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . Free tax filing for state 209   . Free tax filing for state 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). Free tax filing for state The taxable part of his annuity is $9,216 ($12,000 − $2,784). Free tax filing for state 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. Free tax filing for state After Al's death, his widow will apply the same exclusion percentages (20. Free tax filing for state 9% and 2. Free tax filing for state 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. Free tax filing for state Annuity received after June 30, 1986. Free tax filing for state   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. Free tax filing for state Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. Free tax filing for state    Make the election by attaching the following statement to your income tax return. Free tax filing for state    “I elect, under section 1. Free tax filing for state 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. Free tax filing for state ”   The statement must also include your name, address, and social security number. Free tax filing for state   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. Free tax filing for state Disqualifying form of payment or settlement. Free tax filing for state   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. Free tax filing for state See regulations section 1. Free tax filing for state 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. Free tax filing for state You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. Free tax filing for state Worksheets for Determining Taxable Annuity Worksheets I and II. Free tax filing for state   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. Free tax filing for state 72–6(d)(6) Election. Free tax filing for state Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Free tax filing for state 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. Free tax filing for state   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Free tax filing for state )             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. Free tax filing for state If not, the IRS will calculate the refund feature percentage. Free tax filing for state             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Free tax filing for state   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. Free tax filing for state   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. Free tax filing for state   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. Free tax filing for state     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Free tax filing for state 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. Free tax filing for state   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Free tax filing for state )             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. Free tax filing for state If not, the IRS will calculate the refund feature percentage. Free tax filing for state             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Free tax filing for state   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. Free tax filing for state   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. Free tax filing for state 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. Free tax filing for state   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. Free tax filing for state   Actuarial Tables Please click here for the text description of the image. Free tax filing for state Actuarial Tables Please click here for the text description of the image. Free tax filing for state Actuarial Tables Please click here for the text description of the image. Free tax filing for state Actuarial tables Please click here for the text description of the image. 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Free tax filing for state 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. Free tax filing for state If you make this request, you are asking for a ruling. Free tax filing for state User fee. Free tax filing for state   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. Free tax filing for state You should call the IRS for the proper fee. Free tax filing for state A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. Free tax filing for state Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. Free tax filing for state O. Free tax filing for state 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. Free tax filing for state When to make the request. Free tax filing for state   Please note that requests sent between February 1 and April 15 may experience some delay. Free tax filing for state We process requests in the order received, and we will reply to your request as soon as we can process it. Free tax filing for state 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. Free tax filing for state S. Free tax filing for state Individual Income Tax Return, to get an extension of time to file. Free tax filing for state Information you must furnish. Free tax filing for state   You must furnish the information listed below so the IRS can comply with your request. Free tax filing for state Failure to furnish the information will result in a delay in processing your request. Free tax filing for state 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. Free tax filing for state Copies of any documents showing distributions, annuity rates, and annuity options available to you. Free tax filing for state A copy of any Form 1099–R you received since your annuity began. Free tax filing for state A statement indicating whether you have filed your return for the year for which you are making the request. Free tax filing for state If you have requested an extension of time to file that return, please indicate the extension date. Free tax filing for state Your daytime phone number. Free tax filing for state Your current mailing address. Free tax filing for state A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. Free tax filing for state Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. Free tax filing for state A completed Tax Information Sheet (or facsimile) shown on the next page. Free tax filing for state Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. Free tax filing for state This statement must be signed by the retiree or the survivor annuitant. Free tax filing for state It cannot be signed by a representative. Free tax filing for state Tax Information Sheet Please click here for the text description of the image. Free tax filing for state Tax Information Sheet Please click here for the text description of the image. Free tax filing for state 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. Free tax filing for state Free help with your tax return. Free tax filing for state   You can get free help preparing your return nationwide from IRS-certified volunteers. Free tax filing for state The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Free tax filing for state The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Free tax filing for state 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. 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Free tax filing for state Download the free IRS2Go app from the iTunes app store or from Google Play. Free tax filing for state 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. Free tax filing for state Check the status of your 2013 refund with the Where's My Refund? application on IRS. Free tax filing for state gov or download the IRS2Go app and select the Refund Status option. Free tax filing for state The IRS issues more than 9 out of 10 refunds in less than 21 days. Free tax filing for state 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. Free tax filing for state You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Free tax filing for state The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Free tax filing for state Use the Interactive Tax Assistant (ITA) to research your tax questions. Free tax filing for state No need to wait on the phone or stand in line. Free tax filing for state 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. Free tax filing for state When you reach the response screen, you can print the entire interview and the final response for your records. 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Understanding Your CP53C Notice

We tried to direct deposit your refund, but the financial institution couldn’t process it. When refund payments are questionable, we review related returns to ensure the return is valid. We are researching your account, but it will take 8 to 10 weeks to complete our review and verify this refund.


What you need to do

  • You don’t need to do anything at this time.

You may want to

  • Call us at the toll-free number on the notice if you don’t receive your refund check or a follow-up letter within 10 weeks
  • Monitor your financial accounts

However, if you call us before 10 weeks have passed, we won’t have any information about the status of your refund.


Answers to Common Questions

Q. Why was my direct deposit refund returned to the IRS?

A. A financial institution will reject a refund for a variety of reasons. Most often, the personal information on the direct deposit doesn’t match its records: 

  • Name
  • SSN
  • Routing number

Q. Why could the refund review take up to 10 weeks?

A. We must research your account to determine if you are entitled to the refund. We try to balance customer service and tax compliance when we review tax returns. Refund timeframes are also affected by:

  • Bankruptcy
  • An open audit
  • A balance due on a related account (such as a different tax year)

Q. Will calling the IRS give me additional information or speed my refund?

A. No, calling us won’t speed up your refund. You don’t need to call us unless we send you a letter asking ask you to contact us. Our telephone assistors won’t be able to provide any additional information.


Tips for next year

If you request a direct deposit refund, be sure the account you specify is in your name (or your spouse’s if you have a joint refund).


If you changed your name as a result of a recent marriage or divorce, be sure you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration.


Never direct your refund to an account that belongs to a relative, friend, or tax return preparer.

Page Last Reviewed or Updated: 22-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Free Tax Filing For State

Free tax filing for state Publication 514 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. Free tax filing for state Tax questions. Free tax filing for state Useful Items - You may want to see: Reminders Future developments. Free tax filing for state  For the latest information about developments related to Pub. Free tax filing for state 514, such as legislation enacted after it was published, go to www. Free tax filing for state irs. Free tax filing for state gov/pub514. Free tax filing for state Alternative minimum tax. Free tax filing for state  In addition to your regular income tax, you may be liable for the alternative minimum tax. Free tax filing for state A foreign tax credit may be allowed in figuring this tax. Free tax filing for state See the instructions for Form 6251, Alternative Minimum Tax—Individuals, for a discussion of the alternative minimum tax foreign tax credit. Free tax filing for state Change of address. Free tax filing for state  If your address changes from the address shown on your last return, use Form 8822, Change of Address, to notify the Internal Revenue Service. Free tax filing for state Photographs of missing children. Free tax filing for state  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free tax filing for state Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free tax filing for state 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. Free tax filing for state Introduction If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U. Free tax filing for state S. Free tax filing for state tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. Free tax filing for state Taken as a deduction, foreign income taxes reduce your U. Free tax filing for state S. Free tax filing for state taxable income. Free tax filing for state Taken as a credit, foreign income taxes reduce your U. Free tax filing for state S. Free tax filing for state tax liability. Free tax filing for state In most cases, it is to your advantage to take foreign income taxes as a tax credit. Free tax filing for state The major scope of this publication is the foreign tax credit. Free tax filing for state The publication discusses: How to choose to take the credit or the deduction, Who can take the credit, What foreign taxes qualify for the credit, How to figure the credit, and How to carry over unused foreign taxes to other tax years. Free tax filing for state Unless you qualify for exemption from the foreign tax credit limit, you claim the credit by filing Form 1116 with your U. Free tax filing for state S. Free tax filing for state income tax return. Free tax filing for state Two examples with filled-in Forms 1116 are provided at the end of this publication. Free tax filing for state Comments and suggestions. Free tax filing for state   We welcome your comments about this publication and your suggestions for future editions. Free tax filing for state   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free tax filing for state NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free tax filing for state Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free tax filing for state   You can send your comments from www. Free tax filing for state irs. Free tax filing for state gov/formspubs/. Free tax filing for state Click on “More Information” and then on “Comment on Tax Forms and Publications”. Free tax filing for state   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. Free tax filing for state Ordering forms and publications. Free tax filing for state   Visit www. Free tax filing for state irs. Free tax filing for state 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. Free tax filing for state Internal Revenue Service 1201 N. Free tax filing for state Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free tax filing for state   If you have a tax question, check the information available on IRS. Free tax filing for state gov or call 1-800-829-1040. Free tax filing for state We cannot answer tax questions sent to either of the above addresses. Free tax filing for state Useful Items - You may want to see: Publication 54 Tax Guide for U. Free tax filing for state S. Free tax filing for state Citizens and Resident Aliens Abroad 519 U. Free tax filing for state S. Free tax filing for state Tax Guide for Aliens 570 Tax Guide for Individuals With Income From U. Free tax filing for state S. Free tax filing for state Possessions Form (and Instructions) 1116 Foreign Tax Credit See How To Get Tax Help near the end of this publication for information about getting these publications and this form. Free tax filing for state Prev  Up  Next   Home   More Online Publications