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Hrblock home Index A Accounting methods, Accounting Methods Accrual method, Accrual method. Hrblock home Change in accounting method Section 481(a) adjustment. Hrblock home , Change in accounting method. Hrblock home Mark-to-market accounting method, Mark-to-market accounting method. Hrblock home Nonaccrual experience method, Nonaccrual experience method. Hrblock home Percentage of completion method, Percentage of completion method. Hrblock home Accounting periods, Accounting Periods Accumulated earnings tax, Accumulated Earnings Tax Alternative minimum tax (AMT), Alternative Minimum Tax (AMT) At-risk limits, At-Risk Limits B Backup withholding, Backup withholding. Hrblock home Below-market loans, Below-Market Loans C Capital contributions, Capital Contributions Capital losses, Capital Losses Charitable contributions, Charitable Contributions Closely held corporation: At-risk limits, Closely held corporation. Hrblock home Closely held corporations:, Closely held corporations. Hrblock home Comments, Comments and suggestions. Hrblock home Corporate preference items, Corporate Preference Items Corporations, businesses taxed as, Businesses Taxed as Corporations Credits, Credits Credits: Foreign tax, Credits General business credit, Credits Prior year minimum tax, Credits D Distributions: Money or property. Hrblock home , Money or Property Distributions Other, Constructive Distributions Reporting, Reporting Dividends and Other Distributions Stock or stock rights, Distributions of Stock or Stock Rights To shareholders, Distributions to Shareholders Dividends-received deduction, Dividends-Received Deduction E EFTPS, Electronic Federal Tax Payment System, Electronic Federal Tax Payment System (EFTPS). Hrblock home Electronic filing, Electronic filing. Hrblock home Energy-efficient commercial building property deduction, Energy-Efficient Commercial Building Property Deduction Estimated tax, Estimated Tax Extraordinary dividends, Extraordinary Dividends F Figuring: NOL carryovers, Figuring the NOL Carryover Tax, Figuring Tax Foreign tax credit, Credits Form: 1096, Form 1099-DIV. Hrblock home 1099–DIV, Form 1099-DIV. Hrblock home 1118, Credits 1120, Which form to file. Hrblock home 1120-W, How to figure each required installment. Hrblock home 1120X, Refunds. Hrblock home , NOL carryback. Hrblock home 1138, Carryback expected. Hrblock home 1139, Refunds. Hrblock home , NOL carryback. Hrblock home 2220, Form 2220. Hrblock home 3800, Credits, Recapture Taxes 4255, Recapture Taxes 4626, Form 4626. Hrblock home 5452, Form 5452. Hrblock home 7004, Extension of time to file. Hrblock home 8611, Recapture Taxes 8827, Credits 8832, Business formed after 1996. Hrblock home 8834, Recapture Taxes 8845, Recapture Taxes 8874, Recapture Taxes 8882, Recapture Taxes 8912, Credits G Going into business, Costs of Going Into Business I Income tax returns, Income Tax Return L Loans, below-market, Below-Market Loans M Minimum tax credit, Credits N Net operating losses, Net Operating Losses Nontaxable exchange of property for stock, Property Exchanged for Stock P Paid-in capital, Paid-in capital. Hrblock home Passive activity limits, Passive Activity Limits Paying estimated tax, How to pay estimated tax. Hrblock home Penalties Other, Other penalties. Hrblock home Trust fund recovery, Trust fund recovery penalty. Hrblock home Penalties: Estimated tax, Underpayment penalty. Hrblock home Late filing of return, Late filing of return. Hrblock home Late payment of tax, Late payment of tax. Hrblock home Personal service corporation: Figuring tax, Qualified personal service corporation. Hrblock home Personal service corporations:, Personal service corporations. Hrblock home Preference items, Corporate Preference Items Q Qualified refinery property, election to expense, Election to Expense Qualified Refinery Property Qualifying shipping activities, income from, Income From Qualifying Shipping Activities R Recapture taxes: Childcare facilities and services credit , Recapture Taxes Indian employment credit, Recapture Taxes Investment credit, Recapture Taxes Low-income housing credit, Recapture Taxes New markets credit, Recapture Taxes Qualified plug-in electric and electric vehicle credit, Recapture Taxes Recordkeeping, Recordkeeping Related persons, Related Persons Retained earnings, Accumulated Earnings Tax S Suggestions, Comments and suggestions. Hrblock home T Tax help, How To Get Tax Help Tax rate schedule, Tax Rate Schedule Tax, figuring, Figuring Tax Taxpayer Advocate, Contacting your Taxpayer Advocate. Hrblock home TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications
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Address: Better Business Bureau
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Amherst, NY 14228

Phone Number: 716-881-5222

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Address: Better Business Bureau
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Farmingdale, NY 11735

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The Hrblock Home

Hrblock home Publication 575 - Main Content Table of Contents General InformationPension. Hrblock home Annuity. Hrblock home Qualified employee plan. Hrblock home Qualified employee annuity. Hrblock home Designated Roth account. Hrblock home Tax-sheltered annuity plan. Hrblock home Fixed-period annuities. Hrblock home Annuities for a single life. Hrblock home Joint and survivor annuities. Hrblock home Variable annuities. Hrblock home Disability pensions. Hrblock home 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. Hrblock home Taxation of Periodic PaymentsPeriod of participation. Hrblock home 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. Hrblock home No tax withheld. Hrblock home Partial rollovers. Hrblock home Frozen deposits. Hrblock home Reasonable period of time. Hrblock home 20% Mandatory withholding. Hrblock home How to report. Hrblock home How to report. Hrblock home Special rule for Roth IRAs and designated Roth accounts. Hrblock home Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. Hrblock home How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. Hrblock home   Some of the terms used in this publication are defined in the following paragraphs. Hrblock home Pension. Hrblock home   A pension is generally a series of definitely determinable payments made to you after you retire from work. Hrblock home Pension payments are made regularly and are based on such factors as years of service and prior compensation. Hrblock home Annuity. Hrblock home   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. Hrblock home They can be either fixed (under which you receive a definite amount) or variable (not fixed). Hrblock home You can buy the contract alone or with the help of your employer. Hrblock home Qualified employee plan. Hrblock home   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. Hrblock home 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). Hrblock home To determine whether your plan is a qualified plan, check with your employer or the plan administrator. Hrblock home Qualified employee annuity. Hrblock home   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Hrblock home Designated Roth account. Hrblock home   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. Hrblock home Elective deferrals that are designated as Roth contributions are included in your income. Hrblock home However, qualified distributions (explained later) are not included in your income. Hrblock home You should check with your plan administrator to determine if your plan will accept designated Roth contributions. Hrblock home Tax-sheltered annuity plan. Hrblock home   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. Hrblock home Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. Hrblock home Types of pensions and annuities. Hrblock home   Pensions and annuities include the following types. Hrblock home Fixed-period annuities. Hrblock home   You receive definite amounts at regular intervals for a specified length of time. Hrblock home Annuities for a single life. Hrblock home   You receive definite amounts at regular intervals for life. Hrblock home The payments end at death. Hrblock home Joint and survivor annuities. Hrblock home   The first annuitant receives a definite amount at regular intervals for life. Hrblock home After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Hrblock home The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Hrblock home Variable annuities. Hrblock home   You receive payments that may vary in amount for a specified length of time or for life. Hrblock home 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. Hrblock home Disability pensions. Hrblock home   You receive disability payments because you retired on disability and have not reached minimum retirement age. Hrblock home More than one program. Hrblock home   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. Hrblock home 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. Hrblock home Also, you may be considered to have received more than one pension or annuity. Hrblock home Your former employer or the plan administrator should be able to tell you if you have more than one contract. Hrblock home Example. Hrblock home Your employer set up a noncontributory profit-sharing plan for its employees. Hrblock home The plan provides that the amount held in the account of each participant will be paid when that participant retires. Hrblock home 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. Hrblock home 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. Hrblock home Under the pension plan, however, a formula determines the amount of the pension benefits. Hrblock home The amount of contributions is the amount necessary to provide that pension. Hrblock home Each plan is a separate program and a separate contract. Hrblock home 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. Hrblock home Distributions from a designated Roth account are treated separately from other distributions from the plan. Hrblock home Qualified domestic relations order (QDRO). Hrblock home   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. Hrblock home 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. Hrblock home A QDRO may not award an amount or form of benefit that is not available under the plan. Hrblock home   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. Hrblock home 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. Hrblock home The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. Hrblock home The denominator is the present value of all benefits payable to the participant. Hrblock home   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. Hrblock home 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. Hrblock home 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. Hrblock home 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. Hrblock home The earnings are not taxed until distributed either in a withdrawal or in annuity payments. Hrblock home The taxable part of a distribution is treated as ordinary income. Hrblock home Net investment income tax. Hrblock home   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). Hrblock home For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. Hrblock home 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. Hrblock home Withdrawals. Hrblock home   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. Hrblock home The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. Hrblock home   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). Hrblock home 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. Hrblock home 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). Hrblock home   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. Hrblock home   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. Hrblock home The rest is taxable. Hrblock home   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. Hrblock home If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. Hrblock home Annuity payments. Hrblock home   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. Hrblock home For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. Hrblock home 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. Hrblock home For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. Hrblock home Death benefits. Hrblock home    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. Hrblock home If you choose to receive an annuity, the payments are subject to tax as described above. Hrblock home 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. Hrblock home See Survivors and Beneficiaries , later. Hrblock home 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. Hrblock home 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. Hrblock home You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. Hrblock home You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. Hrblock home Your 457(b) plan may have a designated Roth account option. Hrblock home If so, you may be able to roll over amounts to the designated Roth account or make contributions. Hrblock home Elective deferrals to a designated Roth account are included in your income. Hrblock home Qualified distributions (explained later) are not included in your income. Hrblock home See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. Hrblock home This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. Hrblock home For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. Hrblock home Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. Hrblock home 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. Hrblock home Nonelective deferred compensation plans for nonemployees (independent contractors). Hrblock home Deferred compensation plans maintained by churches. Hrblock home Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. Hrblock home An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. Hrblock home 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. Hrblock home 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. Hrblock home Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Hrblock home You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Hrblock home For information on this credit, see Publication 524. Hrblock home Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Hrblock home Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. Hrblock home 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. Hrblock home For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. Hrblock home 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. Hrblock home The premiums can be for coverage for you, your spouse, or dependents. Hrblock home The distribution must be made directly from the plan to the insurance provider. Hrblock home You can exclude from income the smaller of the amount of the insurance premiums or $3,000. Hrblock home You can only make this election for amounts that would otherwise be included in your income. Hrblock home The amount excluded from your income cannot be used to claim a medical expense deduction. Hrblock home 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. Hrblock home If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. Hrblock home The amount shown in box 2a of Form 1099-R does not reflect this exclusion. Hrblock home Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Hrblock home Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Hrblock home Enter “PSO” next to the appropriate line on which you report the taxable amount. Hrblock home 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. Hrblock home Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. Hrblock home These categories are treated differently for income tax purposes. Hrblock home 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. Hrblock home 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. Hrblock home 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. Hrblock home S. Hrblock home Railroad Retirement Board (RRB). Hrblock home 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. Hrblock home The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). Hrblock home It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Hrblock home Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. Hrblock home 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. Hrblock home (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. Hrblock home ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. Hrblock home See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. Hrblock home Form RRB-1099-R is used for U. Hrblock home S. Hrblock home citizens, resident aliens, and nonresident aliens. Hrblock home Nonresident aliens. Hrblock home   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. Hrblock home Nonresident aliens are subject to mandatory U. Hrblock home S. Hrblock home tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. Hrblock home A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. Hrblock home See Tax withholding next for more information. Hrblock home   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. Hrblock home 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. Hrblock home For information on filing requirements for aliens, see Publication 519, U. Hrblock home S. Hrblock home Tax Guide for Aliens. Hrblock home For information on tax treaties between the United States and other countries that may reduce or eliminate U. Hrblock home S. Hrblock home tax on your benefits, see Publication 901, U. Hrblock home S. Hrblock home Tax Treaties. Hrblock home Tax withholding. Hrblock home   To request or change your income tax withholding from SSEB payments, U. Hrblock home S. Hrblock home citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. Hrblock home 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. Hrblock home If you are a nonresident alien or a U. Hrblock home S. Hrblock home 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. Hrblock home S. Hrblock home tax withholding. Hrblock home Nonresident U. Hrblock home S. Hrblock home citizens cannot elect to be exempt from withholding on payments delivered outside of the U. Hrblock home S. Hrblock home Help from the RRB. Hrblock home   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. Hrblock home S. Hrblock home consulate/Embassy if you reside outside the United States. Hrblock home You can visit the RRB on the Internet at www. Hrblock home rrb. Hrblock home gov. Hrblock home Form RRB-1099-R. Hrblock home   The following discussion explains the items shown on Form RRB-1099-R. Hrblock home 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. Hrblock home   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. Hrblock home   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. Hrblock home To determine if any of these rules apply to your benefits, see the discussions about them later. Hrblock home   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. Hrblock home Use distribution code “7” if you are asked for a distribution code. Hrblock home Distribution codes are not shown on Form RRB-1099-R. Hrblock home   There are three copies of this form. Hrblock home Copy B is to be included with your income tax return if federal income tax is withheld. Hrblock home Copy C is for your own records. Hrblock home Copy 2 is filed with your state, city, or local income tax return, when required. Hrblock home See the illustrated Copy B (Form RRB-1099-R) above. Hrblock home       Each beneficiary will receive his or her own Form RRB-1099-R. Hrblock home If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. Hrblock home So that you get your form timely, make sure the RRB always has your current mailing address. Hrblock home Please click here for the text description of the image. Hrblock home Form RRB-1099-R Box 1—Claim Number and Payee Code. Hrblock home   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. Hrblock home This is the number under which the RRB paid your benefits. Hrblock home Your payee code follows your claim number and is the last number in this box. Hrblock home It is used by the RRB to identify you under your claim number. Hrblock home In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. Hrblock home Box 2—Recipient's Identification Number. Hrblock home   This is the recipient's U. Hrblock home S. Hrblock home taxpayer identification number. Hrblock home 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. Hrblock home 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. Hrblock home The Instructions for Form W-7 explain how and when to apply. Hrblock home Box 3—Employee Contributions. Hrblock home   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. Hrblock home 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). Hrblock home (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. Hrblock home ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. Hrblock home It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. Hrblock home If this amount has changed, the change is retroactive. Hrblock home You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. Hrblock home If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. Hrblock home    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. Hrblock home Box 4—Contributory Amount Paid. Hrblock home   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. Hrblock home (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Hrblock home ) This amount is the total contributory pension paid in 2013. Hrblock home It may be partly taxable and partly tax free or fully taxable. Hrblock home 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. Hrblock home Box 5—Vested Dual Benefit. Hrblock home   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. Hrblock home It is fully taxable. Hrblock home VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Hrblock home Note. Hrblock home The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. Hrblock home Box 6—Supplemental Annuity. Hrblock home   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. Hrblock home It is fully taxable. Hrblock home Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Hrblock home Box 7—Total Gross Paid. Hrblock home   This is the sum of boxes 4, 5, and 6. Hrblock home The amount represents the total pension paid in 2013. Hrblock home Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Hrblock home Box 8—Repayments. Hrblock home   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. Hrblock home The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. Hrblock home It only includes repayments of benefits that were taxable to you. Hrblock home 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. Hrblock home If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. Hrblock home For more information about repayments, see Repayment of benefits received in an earlier year , later. Hrblock home    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. Hrblock home Box 9—Federal Income Tax Withheld. Hrblock home   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. Hrblock home Include this on your income tax return as tax withheld. Hrblock home 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. Hrblock home Determine the total amount of U. Hrblock home S. Hrblock home 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. Hrblock home Box 10—Rate of Tax. Hrblock home   If you are taxed as a U. Hrblock home S. Hrblock home citizen or resident alien, this box does not apply to you. Hrblock home 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. Hrblock home 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. Hrblock home Box 11—Country. Hrblock home   If you are taxed as a U. Hrblock home S. Hrblock home citizen or resident alien, this box does not apply to you. Hrblock home 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. Hrblock home 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. Hrblock home Box 12—Medicare Premium Total. Hrblock home   This is for information purposes only. Hrblock home The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. Hrblock home Medicare premium refunds are not included in the Medicare total. Hrblock home 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). Hrblock home 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. Hrblock home 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. Hrblock home Repayment of benefits received in an earlier year. Hrblock home   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. Hrblock home   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. Hrblock home The 2%-of-adjusted-gross-income limit applies to this deduction. Hrblock home You cannot take this deduction if you file Form 1040A. Hrblock home    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. Hrblock home For more information, see Repayments in Publication 525. Hrblock home Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. Hrblock home However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. Hrblock home (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. Hrblock home ) 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. Hrblock home See Estimated tax , later. Hrblock home 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. Hrblock home For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. Hrblock home 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. Hrblock home Choosing no withholding. Hrblock home   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. Hrblock home You can make this choice on Form W-4P for periodic and nonperiodic payments. Hrblock home This choice generally remains in effect until you revoke it. Hrblock home   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. Hrblock home   To choose not to have tax withheld, a U. Hrblock home S. Hrblock home citizen or resident alien must give the payer a home address in the United States or its possessions. Hrblock home Without that address, the payer must withhold tax. Hrblock home For example, the payer has to withhold tax if the recipient has provided a U. Hrblock home S. Hrblock home address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. Hrblock home S. Hrblock home home address. Hrblock home   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. Hrblock home S. Hrblock home citizen, a U. Hrblock home S. Hrblock home resident alien, or someone who left the country to avoid tax. Hrblock home But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. Hrblock home This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. Hrblock home For details, get Publication 519. Hrblock home Periodic payments. Hrblock home   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. Hrblock home 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). Hrblock home You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). Hrblock home If you do not, tax will be withheld as if you were married and claiming three withholding allowances. Hrblock home   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. Hrblock home   You must file a new withholding certificate to change the amount of withholding. Hrblock home Nonperiodic distributions. Hrblock home    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. Hrblock home You can also ask the payer to withhold an additional amount using Form W-4P. Hrblock home 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. Hrblock home Eligible rollover distribution. Hrblock home    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. Hrblock home You cannot choose not to have tax withheld from an eligible rollover distribution. Hrblock home 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. Hrblock home For more information about eligible rollover distributions, see Rollovers , later. Hrblock home Estimated tax. Hrblock home   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. Hrblock home 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. Hrblock home 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. Hrblock home For more information, get Publication 505, Tax Withholding and Estimated Tax. Hrblock home 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. Hrblock home See Publication 915. Hrblock home You can choose to have income tax withheld from those benefits. Hrblock home Use Form W-4V to make this choice. Hrblock home 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). Hrblock home 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. Hrblock home Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. Hrblock home 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). Hrblock home To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. Hrblock home This includes the amounts your employer contributed that were taxable to you when paid. Hrblock home (However, see Foreign employment contributions , later. Hrblock home ) 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). Hrblock home It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). Hrblock home From this total cost you must subtract the following amounts. Hrblock home 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. Hrblock home Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). Hrblock home 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. Hrblock home (See Simplified Method , later, for information on its required use. Hrblock home ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. Hrblock home (See General Rule , later, for information on its use. Hrblock home ) 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. Hrblock home For more information, see Publication 939. Hrblock home The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . Hrblock home Form 1099-R. Hrblock home 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. Hrblock home Annuity starting date defined. Hrblock home   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. Hrblock home Example. Hrblock home 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. Hrblock home The annuity starting date is July 1. Hrblock home 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. Hrblock home Designated Roth accounts. Hrblock home   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. Hrblock home Your cost will also include any in-plan Roth rollovers you included in income. Hrblock home Foreign employment contributions. Hrblock home   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. Hrblock home 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. Hrblock home Foreign employment contributions while a nonresident alien. Hrblock home   In determining your cost, special rules apply if you are a U. Hrblock home S. Hrblock home citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. Hrblock home 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. Hrblock home Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. Hrblock home 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). Hrblock home These payments are also known as amounts received as an annuity. Hrblock home If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. Hrblock home In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. Hrblock home 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). Hrblock home Designated Roth accounts. Hrblock home   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. Hrblock home This applies to both your cost in the account and income earned on that account. Hrblock home 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. Hrblock home   If the distribution is not a qualified distribution, the rules discussed in this section apply. Hrblock home The designated Roth account is treated as a separate contract. Hrblock home Period of participation. Hrblock home   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. Hrblock home Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. Hrblock home   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. Hrblock home   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. Hrblock home This is known as an in-plan Roth rollover. Hrblock home For more details, see In-plan Roth rollovers , later. Hrblock home 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). Hrblock home You did not pay anything or are not considered to have paid anything for your pension or annuity. Hrblock home Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. Hrblock home Your employer did not withhold contributions from your salary. Hrblock home You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). Hrblock home Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. Hrblock home You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Hrblock home Deductible voluntary employee contributions. Hrblock home   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. Hrblock home Accumulated deductible voluntary employee contributions include net earnings on the contributions. Hrblock home If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. Hrblock home 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. Hrblock home 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. Hrblock home The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Hrblock home You figure the tax-free part of the payment using one of the following methods. Hrblock home Simplified Method. Hrblock home 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). Hrblock home You cannot use this method if your annuity is paid under a nonqualified plan. Hrblock home General Rule. Hrblock home You must use this method if your annuity is paid under a nonqualified plan. Hrblock home You generally cannot use this method if your annuity is paid under a qualified plan. Hrblock home 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. Hrblock home If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. Hrblock home Qualified plan annuity starting before November 19, 1996. Hrblock home   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. Hrblock home If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. Hrblock home 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. Hrblock home Exclusion limit. Hrblock home   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. Hrblock home Once your annuity starting date is determined, it does not change. Hrblock home 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. Hrblock home That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. Hrblock home Exclusion limited to cost. Hrblock home   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. Hrblock home 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. Hrblock home This deduction is not subject to the 2%-of-adjusted-gross-income limit. Hrblock home Example 1. Hrblock home Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. Hrblock home The total cost of your annuity is $12,000. Hrblock home Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). Hrblock home After that, your annuity payments are generally fully taxable. Hrblock home Example 2. Hrblock home The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. Hrblock home You have recovered tax free only $9,600 (8 × $1,200) of your cost. Hrblock home An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. Hrblock home Exclusion not limited to cost. Hrblock home   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Hrblock home 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. Hrblock home The total exclusion may be more than your cost. Hrblock home 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. Hrblock home 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. Hrblock home For any other annuity, this number is the number of monthly annuity payments under the contract. Hrblock home Who must use the Simplified Method. Hrblock home   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. Hrblock home You receive your pension or annuity payments from any of the following plans. Hrblock home A qualified employee plan. Hrblock home A qualified employee annuity. Hrblock home A tax-sheltered annuity plan (403(b) plan). Hrblock home On your annuity starting date, at least one of the following conditions applies to you. Hrblock home You are under age 75. Hrblock home You are entitled to less than 5 years of guaranteed payments. Hrblock home Guaranteed payments. Hrblock home   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. Hrblock home 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. Hrblock home Annuity starting before November 19, 1996. Hrblock home   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. Hrblock home 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 . Hrblock home Who cannot use the Simplified Method. Hrblock home   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. Hrblock home See General Rule , later. Hrblock home How to use the Simplified Method. Hrblock home    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. Hrblock home Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. Hrblock home   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. Hrblock home How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. Hrblock home 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. Hrblock home    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. Hrblock home Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Hrblock home Single-life annuity. Hrblock home   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. Hrblock home Enter on line 3 the number shown for your age on your annuity starting date. Hrblock home This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Hrblock home Multiple-lives annuity. Hrblock home   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. Hrblock home Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. Hrblock home 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. Hrblock home 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. Hrblock home Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. Hrblock home   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Hrblock home 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. Hrblock home This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Hrblock home Fixed-period annuity. Hrblock home   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. Hrblock home Line 6. Hrblock home   The amount on line 6 should include all amounts that could have been recovered in prior years. Hrblock home If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. Hrblock home Example. Hrblock home Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. Hrblock home Bill's annuity starting date is January 1, 2013. Hrblock home The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. Hrblock home Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Hrblock home 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. Hrblock home 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. Hrblock home 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. Hrblock home His completed worksheet is shown later. Hrblock home Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Hrblock home Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Hrblock home The full amount of any annuity payments received after 310 payments are paid must be included in gross income. Hrblock home 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. Hrblock home This deduction is not subject to the 2%-of-adjusted-gross-income limit. Hrblock home Worksheet A. Hrblock home Simplified Method Worksheet for Bill Smith 1. Hrblock home Enter the total pension or annuity payments received this year. Hrblock home Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Hrblock home $14,400 2. Hrblock home Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. Hrblock home * See Cost (Investment in the Contract) , earlier 2. Hrblock home 31,000   Note. Hrblock home 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). Hrblock home Otherwise, go to line 3. Hrblock home     3. Hrblock home Enter the appropriate number from Table 1 below. Hrblock home 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. Hrblock home 310 4. Hrblock home Divide line 2 by the number on line 3 4. Hrblock home 100 5. Hrblock home Multiply line 4 by the number of months for which this year's payments were made. Hrblock home If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Hrblock home Otherwise, go to line 6 5. Hrblock home 1,200 6. Hrblock home Enter any amount previously recovered tax free in years after 1986. Hrblock home This is the amount shown on line 10 of your worksheet for last year 6. Hrblock home -0- 7. Hrblock home Subtract line 6 from line 2 7. Hrblock home 31,000 8. Hrblock home Enter the smaller of line 5 or line 7 8. Hrblock home 1,200 9. Hrblock home Taxable amount for year. Hrblock home Subtract line 8 from line 1. Hrblock home Enter the result, but not less than zero. Hrblock home Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Hrblock home Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Hrblock home 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. Hrblock home $13,200 10. Hrblock home Was your annuity starting date before 1987? □ Yes. Hrblock home STOP. Hrblock home Do not complete the rest of this worksheet. Hrblock home  ☑ No. Hrblock home Add lines 6 and 8. Hrblock home This is the amount you have recovered tax free through 2013. Hrblock home You will need this number if you need to fill out this worksheet next year 10. Hrblock home 1,200 11. Hrblock home Balance of cost to be recovered. Hrblock home Subtract line 10 from line 2. Hrblock home If zero, you will not have to complete this worksheet next year. Hrblock home The payments you receive next year will generally be fully taxable 11. Hrblock home $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Hrblock home           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. Hrblock home . Hrblock home . Hrblock home BEFORE November 19, 1996, enter on line 3. Hrblock home . Hrblock home . Hrblock home AFTER November 18, 1996, enter on line 3. Hrblock home . Hrblock home . Hrblock home     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. Hrblock home . Hrblock home . Hrblock home THEN enter on line 3. Hrblock home . Hrblock home . Hrblock home     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. Hrblock home   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. Hrblock home Figure your share by taking the following steps. Hrblock home Complete your worksheet through line 4 to figure the monthly tax-free amount. Hrblock home Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. Hrblock home Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. Hrblock home The result is your share of the monthly tax-free amount. Hrblock home   Replace the amount on line 4 of the worksheet with the result in (3) above. Hrblock home Enter that amount on line 4 of your worksheet each year. Hrblock home 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. Hrblock home Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Hrblock home To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. Hrblock home Who must use the General Rule. Hrblock home   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. Hrblock home Annuity starting before November 19, 1996. Hrblock home   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. Hrblock home You also had to use it for any fixed-period annuity. Hrblock home If you did not have to use the General Rule, you could have chosen to use it. Hrblock home 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. Hrblock home   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. Hrblock home Who cannot use the General Rule. Hrblock home   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. Hrblock home See Simplified Method , earlier. Hrblock home More information. Hrblock home   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. Hrblock home Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. Hrblock home Nonperiodic distributions are also known as amounts not received as an annuity. Hrblock home They include all payments other than periodic payments and corrective distributions. Hrblock home For example, the following items are treated as nonperiodic distributions. Hrblock home Cash withdrawals. Hrblock home Distributions of current earnings (dividends) on your investment. Hrblock home 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. Hrblock home Certain loans. Hrblock home See Loans Treated as Distributions , later. Hrblock home The value of annuity contracts transferred without full and adequate consideration. Hrblock home See Transfers of Annuity Contracts , later. Hrblock home Corrective distributions of excess plan contributions. Hrblock home   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. Hrblock home To correct an excess, your plan may distribute it to you (along with any income earned on the excess). Hrblock home Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. Hrblock home 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. Hrblock home    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. Hrblock home   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. Hrblock home 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. Hrblock home 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. Hrblock home 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. Hrblock home 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. Hrblock home See Rollovers, later. Hrblock home 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. Hrblock home See Lump-Sum Distributions, later. Hrblock home Annuity starting date. Hrblock home   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. Hrblock home Distributions of employer securities. Hrblock home    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. Hrblock home The NUA is the net increase in the securities' value while they were in the trust. Hrblock home This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. Hrblock home   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. Hrblock home    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. Hrblock home    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