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Mypay dfas mil login 3. Mypay dfas mil login   Savings Incentive Match Plans for Employees (SIMPLE) Table of Contents Introduction What Is a SIMPLE Plan?Eligible Employees How Are Contributions Made? How Much Can Be Contributed on Your Behalf?Matching contributions less than 3%. Mypay dfas mil login Traditional IRA mistakenly moved to SIMPLE IRA. Mypay dfas mil login When Can You Withdraw or Use Assets?Are Distributions Taxable? Introduction This chapter is for employees who need information about savings incentive match plans for employees (SIMPLE plans). Mypay dfas mil login It explains what a SIMPLE plan is, contributions to a SIMPLE plan, and distributions from a SIMPLE plan. Mypay dfas mil login Under a SIMPLE plan, SIMPLE retirement accounts for participating employees can be set up either as: Part of a 401(k) plan, or A plan using IRAs (SIMPLE IRA). Mypay dfas mil login This chapter only discusses the SIMPLE plan rules that relate to SIMPLE IRAs. Mypay dfas mil login See chapter 3 of Publication 560 for information on any special rules for SIMPLE plans that do not use IRAs. Mypay dfas mil login If your employer maintains a SIMPLE plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution. Mypay dfas mil login See Rollovers and Transfers Exception, later under When Can You Withdraw or Use Assets. Mypay dfas mil login What Is a SIMPLE Plan? A SIMPLE plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Mypay dfas mil login See chapter 3 of Publication 560 for information on the requirements employers must satisfy to set up a SIMPLE plan. Mypay dfas mil login A SIMPLE plan is a written agreement (salary reduction agreement) between you and your employer that allows you, if you are an eligible employee (including a self-employed individual), to choose to: Reduce your compensation (salary) by a certain percentage each pay period, and Have your employer contribute the salary reductions to a SIMPLE IRA on your behalf. Mypay dfas mil login These contributions are called salary reduction contributions. Mypay dfas mil login All contributions under a SIMPLE IRA plan must be made to SIMPLE IRAs, not to any other type of IRA. Mypay dfas mil login The SIMPLE IRA can be an individual retirement account or an individual retirement annuity, described in chapter 1. Mypay dfas mil login Contributions are made on behalf of eligible employees. Mypay dfas mil login (See Eligible Employees below. Mypay dfas mil login ) Contributions are also subject to various limits. Mypay dfas mil login (See How Much Can Be Contributed on Your Behalf , later. Mypay dfas mil login ) In addition to salary reduction contributions, your employer must make either matching contributions or nonelective contributions. Mypay dfas mil login See How Are Contributions Made , later. Mypay dfas mil login You may be able to claim a credit for contributions to your SIMPLE plan. Mypay dfas mil login For more information, see chapter 4. Mypay dfas mil login Eligible Employees You must be allowed to participate in your employer's SIMPLE plan if you: Received at least $5,000 in compensation from your employer during any 2 years prior to the current year, and Are reasonably expected to receive at least $5,000 in compensation during the calendar year for which contributions are made. Mypay dfas mil login Self-employed individual. Mypay dfas mil login   For SIMPLE plan purposes, the term employee includes a self-employed individual who received earned income. Mypay dfas mil login Excludable employees. Mypay dfas mil login   Your employer can exclude the following employees from participating in the SIMPLE plan. Mypay dfas mil login Employees whose retirement benefits are covered by a collective bargaining agreement (union contract). Mypay dfas mil login Employees who are nonresident aliens and received no earned income from sources within the United States. Mypay dfas mil login Employees who would not have been eligible employees if an acquisition, disposition, or similar transaction had not occurred during the year. Mypay dfas mil login Compensation. Mypay dfas mil login   For purposes of the SIMPLE plan rules, your compensation for a year generally includes the following amounts. Mypay dfas mil login Wages, tips, and other pay from your employer that is subject to income tax withholding. Mypay dfas mil login Deferred amounts elected under any 401(k) plans, 403(b) plans, government (section 457) plans, SEP plans, and SIMPLE plans. Mypay dfas mil login Self-employed individual compensation. Mypay dfas mil login   For purposes of the SIMPLE plan rules, if you are self-employed, your compensation for a year is your net earnings from self-employment (Schedule SE (Form 1040), Section A, line 4, or Section B, line 6) before subtracting any contributions made to a SIMPLE IRA on your behalf. Mypay dfas mil login   For these purposes, net earnings from self-employment include services performed while claiming exemption from self-employment tax as a member of a group conscientiously opposed to social security benefits. Mypay dfas mil login How Are Contributions Made? Contributions under a salary reduction agreement are called salary reduction contributions. Mypay dfas mil login They are made on your behalf by your employer. Mypay dfas mil login Your employer must also make either matching contributions or nonelective contributions. Mypay dfas mil login Salary reduction contributions. Mypay dfas mil login   During the 60-day period before the beginning of any year, and during the 60-day period before you are eligible, you can choose salary reduction contributions expressed either as a percentage of compensation, or as a specific dollar amount (if your employer offers this choice). Mypay dfas mil login You can choose to cancel the election at any time during the year. Mypay dfas mil login   Salary reduction contributions are also referred to as “elective deferrals. Mypay dfas mil login ”   Your employer cannot place restrictions on the contributions amount (such as by limiting the contributions percentage), except to comply with the salary reduction contributions limit, discussed under How Much Can Be Contributed on Your Behalf, later. Mypay dfas mil login Matching contributions. Mypay dfas mil login   Unless your employer chooses to make nonelective contributions, your employer must make contributions equal to the salary reduction contributions you choose (elect), but only up to certain limits. Mypay dfas mil login See How Much Can Be Contributed on Your Behalf below. Mypay dfas mil login These contributions are in addition to the salary reduction contributions and must be made to the SIMPLE IRAs of all eligible employees (defined earlier) who chose salary reductions. Mypay dfas mil login These contributions are referred to as matching contributions. Mypay dfas mil login   Matching contributions on behalf of a self-employed individual are not treated as salary reduction contributions. Mypay dfas mil login Nonelective contributions. Mypay dfas mil login   Instead of making matching contributions, your employer may be able to choose to make nonelective contributions on behalf of all eligible employees. Mypay dfas mil login These nonelective contributions must be made on behalf of each eligible employee who has at least $5,000 of compensation from your employer, whether or not the employee chose salary reductions. Mypay dfas mil login   One of the requirements your employer must satisfy is notifying the employees that the election was made. Mypay dfas mil login For other requirements that your employer must satisfy, see chapter 3 of Publication 560. Mypay dfas mil login How Much Can Be Contributed on Your Behalf? The limits on contributions to a SIMPLE IRA vary with the type of contribution that is made. Mypay dfas mil login Salary reduction contributions limit. Mypay dfas mil login   Salary reduction contributions (employee-chosen contributions or elective deferrals) that your employer can make on your behalf under a SIMPLE plan are limited to $12,000 for 2013. Mypay dfas mil login The limitation remains at $12,000 for 2014. Mypay dfas mil login If you are a participant in any other employer plans during 2013 and you have elective salary reductions or deferred compensation under those plans, the salary reduction contributions under the SIMPLE plan also are included in the annual limit of $17,500 for 2013 on exclusions of salary reductions and other elective deferrals. Mypay dfas mil login You, not your employer, are responsible for monitoring compliance with these limits. Mypay dfas mil login Additional elective deferrals can be contributed to your SIMPLE plan if: You reached age 50 by the end of 2013, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions, such as the regular annual limit. Mypay dfas mil login The most that can be contributed in additional elective deferrals to your SIMPLE plan is the lesser of the following two amounts. Mypay dfas mil login $2,500 for 2013, or Your compensation for the year reduced by your other elective deferrals for the year. Mypay dfas mil login The additional deferrals are not subject to any other contribution limit and are not taken into account in applying other contribution limits. Mypay dfas mil login The additional deferrals are not subject to the nondiscrimination rules as long as all eligible participants are allowed to make them. Mypay dfas mil login Matching employer contributions limit. Mypay dfas mil login   Generally, your employer must make matching contributions to your SIMPLE IRA in an amount equal to your salary reduction contributions. Mypay dfas mil login These matching contributions cannot be more than 3% of your compensation for the calendar year. Mypay dfas mil login See Matching contributions less than 3% below. Mypay dfas mil login Example 1. Mypay dfas mil login In 2013, Joshua was a participant in his employer's SIMPLE plan. Mypay dfas mil login His compensation, before SIMPLE plan contributions, was $41,600 ($800 per week). Mypay dfas mil login Instead of taking it all in cash, Joshua elected to have 12. Mypay dfas mil login 5% of his weekly pay ($100) contributed to his SIMPLE IRA. Mypay dfas mil login For the full year, Joshua's salary reduction contributions were $5,200, which is less than the $12,000 limit on these contributions. Mypay dfas mil login Under the plan, Joshua's employer was required to make matching contributions to Joshua's SIMPLE IRA. Mypay dfas mil login Because his employer's matching contributions must equal Joshua's salary reductions, but cannot be more than 3% of his compensation (before salary reductions) for the year, his employer's matching contribution was limited to $1,248 (3% of $41,600). Mypay dfas mil login Example 2. Mypay dfas mil login Assume the same facts as in Example 1 , except that Joshua's compensation for the year was $408,163 and he chose to have 2. Mypay dfas mil login 94% of his weekly pay contributed to his SIMPLE IRA. Mypay dfas mil login In this example, Joshua's salary reduction contributions for the year (2. Mypay dfas mil login 94% × $408,163) were equal to the 2013 limit for salary reduction contributions ($12,000). Mypay dfas mil login Because 3% of Joshua's compensation ($12,245) is more than the amount his employer was required to match ($12,000), his employer's matching contributions were limited to $12,000. Mypay dfas mil login In this example, total contributions made on Joshua's behalf for the year were $24,000 ($12,000 (Joshua's contributions) + $12,000 (matching contributions)), the maximum contributions permitted under a SIMPLE IRA for 2013. Mypay dfas mil login Matching contributions less than 3%. Mypay dfas mil login   Your employer can reduce the 3% limit on matching contributions for a calendar year, but only if: The limit is not reduced below 1%, The limit is not reduced for more than 2 years out of the 5-year period that ends with (and includes) the year for which the election is effective, and Employees are notified of the reduced limit within a reasonable period of time before the 60-day election period during which they can enter into salary reduction agreements. Mypay dfas mil login   For purposes of applying the rule in item (2) in determining whether the limit was reduced below 3% for the year, any year before the first year in which your employer (or a former employer) maintains a SIMPLE IRA plan will be treated as a year for which the limit was 3%. Mypay dfas mil login If your employer chooses to make nonelective contributions for a year, that year also will be treated as a year for which the limit was 3%. Mypay dfas mil login Nonelective employer contributions limit. Mypay dfas mil login   If your employer chooses to make nonelective contributions, instead of matching contributions, to each eligible employee's SIMPLE IRA, contributions must be 2% of your compensation for the entire year. Mypay dfas mil login For 2013, only $255,000 of your compensation can be taken into account to figure the contribution limit. Mypay dfas mil login   Your employer can substitute the 2% nonelective contribution for the matching contribution for a year if both of the following requirements are met. Mypay dfas mil login Eligible employees are notified that a 2% nonelective contribution will be made instead of a matching contribution. Mypay dfas mil login This notice is provided within a reasonable period during which employees can enter into salary reduction agreements. Mypay dfas mil login Example 3. Mypay dfas mil login Assume the same facts as in Example 2 , except that Joshua's employer chose to make nonelective contributions instead of matching contributions. Mypay dfas mil login Because his employer's nonelective contributions are limited to 2% of up to $255,000 of Joshua's compensation, his employer's contribution to Joshua's SIMPLE IRA was limited to $5,100. Mypay dfas mil login In this example, total contributions made on Joshua's behalf for the year were $17,100 (Joshua's salary reductions of $12,000 plus his employer's contribution of $5,100). Mypay dfas mil login Traditional IRA mistakenly moved to SIMPLE IRA. Mypay dfas mil login   If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA. Mypay dfas mil login For more information, see Recharacterizations in chapter 1. Mypay dfas mil login Recharacterizing employer contributions. Mypay dfas mil login   You cannot recharacterize employer contributions (including elective deferrals) under a SEP or SIMPLE plan as contributions to another IRA. Mypay dfas mil login SEPs are discussed in chapter 2 of Publication 560. Mypay dfas mil login SIMPLE plans are discussed in this chapter. Mypay dfas mil login Converting from a SIMPLE IRA. Mypay dfas mil login   Generally, you can convert an amount in your SIMPLE IRA to a Roth IRA under the same rules explained in chapter 1 under Converting From Any Traditional IRA Into a Roth IRA . Mypay dfas mil login    However, you cannot convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer. Mypay dfas mil login When Can You Withdraw or Use Assets? Generally, the same distribution (withdrawal) rules that apply to traditional IRAs apply to SIMPLE IRAs. Mypay dfas mil login These rules are discussed in chapter 1. Mypay dfas mil login Your employer cannot restrict you from taking distributions from a SIMPLE IRA. Mypay dfas mil login Are Distributions Taxable? Generally, distributions from a SIMPLE IRA are fully taxable as ordinary income. Mypay dfas mil login If the distribution is an early distribution (discussed in chapter 1), it may be subject to the additional tax on early distributions. Mypay dfas mil login See Additional Tax on Early Distributions, later. Mypay dfas mil login Rollovers and Transfers Exception Generally, rollovers and trustee-to-trustee transfers are not taxable distributions. Mypay dfas mil login Two-year rule. Mypay dfas mil login   To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. Mypay dfas mil login The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE IRA. Mypay dfas mil login   After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan). Mypay dfas mil login Additional Tax on Early Distributions The additional tax on early distributions (discussed in chapter 1) applies to SIMPLE IRAs. Mypay dfas mil login If a distribution is an early distribution and occurs during the 2-year period following the date on which you first participated in your employer's SIMPLE plan, the additional tax on early distributions is increased from 10% to 25%. Mypay dfas mil login If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed. Mypay dfas mil login Prev  Up  Next   Home   More Online Publications
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Understanding your CP22A Notice

We made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s).

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You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

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What you need to do

  • Read your notice carefully ― it will explain why you owe money on your taxes.
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  • Make payment arrangements if you can't pay the full amount you owe.
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Answers to Common Questions

The notice says "Based on the information you provided, we changed your 200X Form 1040 to correct your:..." but I don't remember sending any change to IRS. How can I find out what IRS received to initiate this change?
Please contact us at the number listed on the top right corner of your notice for specific information about your tax return.

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Mention that you got a CP22A notice with a balance due and you need to review your account with a customer service representative. Be sure to have a copy of your notice and your tax return before you call.

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Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Page Last Reviewed or Updated: 03-Mar-2014

The Mypay Dfas Mil Login

Mypay dfas mil login 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. Mypay dfas mil login A pension is generally a series of payments made to you after you retire from work. Mypay dfas mil login Pension payments are made regularly and are for past services with an employer. Mypay dfas mil login An annuity is a series of payments under a contract. Mypay dfas mil login You can buy the contract alone or you can buy it with the help of your employer. Mypay dfas mil login Annuity payments are made regularly for more than one full year. Mypay dfas mil login Note. Mypay dfas mil login Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. Mypay dfas mil login Types of pensions and annuities. Mypay dfas mil login   Particular types of pensions and annuities include: Fixed period annuities. Mypay dfas mil login You receive definite amounts at regular intervals for a definite length of time. Mypay dfas mil login Annuities for a single life. Mypay dfas mil login You receive definite amounts at regular intervals for life. Mypay dfas mil login The payments end at death. Mypay dfas mil login Joint and survivor annuities. Mypay dfas mil login The first annuitant receives a definite amount at regular intervals for life. Mypay dfas mil login After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Mypay dfas mil login The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Mypay dfas mil login Variable annuities. Mypay dfas mil login You receive payments that may vary in amount for a definite length of time or for life. Mypay dfas mil login The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. Mypay dfas mil login Disability pensions. Mypay dfas mil login You are under minimum retirement age and receive payments because you retired on disability. Mypay dfas mil login 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. Mypay dfas mil login If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. Mypay dfas mil login 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. Mypay dfas mil login This plan must meet Internal Revenue Code requirements. Mypay dfas mil login It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. Mypay dfas mil login However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. Mypay dfas mil login A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Mypay dfas mil login A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. Mypay dfas mil login   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. Mypay dfas mil login A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. Mypay dfas mil login It does not qualify for most of the tax benefits of a qualified plan. Mypay dfas mil login Annuity worksheets. Mypay dfas mil login   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. Mypay dfas mil login Request for a ruling. Mypay dfas mil login   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. Mypay dfas mil login This is treated as a request for a ruling. Mypay dfas mil login See Requesting a Ruling on Taxation of Annuity near the end of this publication. Mypay dfas mil login Withholding tax and estimated tax. Mypay dfas mil login   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. Mypay dfas mil login 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. Mypay dfas mil login 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. Mypay dfas mil login 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). Mypay dfas mil login These payments are also known as amounts received as an annuity. Mypay dfas mil login 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. Mypay dfas mil login In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. Mypay dfas mil login The amount of each payment that is more than the part that represents your net cost is taxable. Mypay dfas mil login 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. Mypay dfas mil login These terms are explained in the following discussions. Mypay dfas mil login 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. Mypay dfas mil login First, find your net cost of the contract as of the annuity starting date (defined later). Mypay dfas mil login To find this amount, you must first figure the total premiums, contributions, or other amounts paid. Mypay dfas mil login This includes the amounts your employer contributed if you were required to include these amounts in income. Mypay dfas mil login It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). Mypay dfas mil login 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. Mypay dfas mil login Any additional premiums paid for double indemnity or disability benefits. Mypay dfas mil login Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). Mypay dfas mil login 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. Mypay dfas mil login Example. Mypay dfas mil login 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. Mypay dfas mil login The annuity starting date is July 1. Mypay dfas mil login This is the date you use in figuring your investment in the contract and your expected return (discussed later). Mypay dfas mil login Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. Mypay dfas mil login Foreign employment. Mypay dfas mil login   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. Mypay dfas mil login 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. Mypay dfas mil login Foreign employment contributions while a nonresident alien. Mypay dfas mil login   In determining your cost, special rules apply if you are a U. Mypay dfas mil login S. Mypay dfas mil login citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. Mypay dfas mil login 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. Mypay dfas mil login Death benefit exclusion. Mypay dfas mil login   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. Mypay dfas mil login The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. Mypay dfas mil login How to adjust your total cost. Mypay dfas mil login   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. Mypay dfas mil login Add it to the cost or unrecovered cost of the annuity at the annuity starting date. Mypay dfas mil login See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. Mypay dfas mil login Net cost. Mypay dfas mil login   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. Mypay dfas mil login This is the unrecovered investment in the contract as of the annuity starting date. Mypay dfas mil login If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. Mypay dfas mil login Refund feature. Mypay dfas mil login   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. Mypay dfas mil login 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. Mypay dfas mil login   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. Mypay dfas mil login Zero value of refund feature. Mypay dfas mil login   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. Mypay dfas mil login   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). Mypay dfas mil login   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. Mypay dfas mil login Examples. Mypay dfas mil login The first example shows how to figure the value of the refund feature when there is only one beneficiary. Mypay dfas mil login 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. Mypay dfas mil login In both examples, the taxpayer elects to use Tables V through VIII. Mypay dfas mil login 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. Mypay dfas mil login Example 1. Mypay dfas mil login At age 65, Barbara bought for $21,053 an annuity with a refund feature. Mypay dfas mil login She will get $100 a month for life. Mypay dfas mil login 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. Mypay dfas mil login In this case, the contract cost and the total guaranteed return are the same ($21,053). Mypay dfas mil login 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. Mypay dfas mil login 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. Mypay dfas mil login 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). Mypay dfas mil login 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. Mypay dfas mil login Example 2. Mypay dfas mil login John died while still employed. Mypay dfas mil login His widow, Eleanor, age 48, receives $171 a month for the rest of her life. Mypay dfas mil login John's son, Elmer, age 9, receives $50 a month until he reaches age 18. Mypay dfas mil login John's contributions to the retirement fund totaled $7,559. Mypay dfas mil login 45, with interest on those contributions of $1,602. Mypay dfas mil login 53. Mypay dfas mil login The guarantee or total refund feature of the contract is $9,161. Mypay dfas mil login 98 ($7,559. Mypay dfas mil login 45 plus $1,602. Mypay dfas mil login 53). Mypay dfas mil login 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. Mypay dfas mil login 9 $71,614. Mypay dfas mil login 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. Mypay dfas mil login 0 5,400. Mypay dfas mil login 00   3) Total expected return   $77,014. Mypay dfas mil login 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. Mypay dfas mil login 45   2) Guaranteed amount (contributions of $7,559. Mypay dfas mil login 45 plus interest of $1,602. Mypay dfas mil login 53) $9,161. Mypay dfas mil login 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. Mypay dfas mil login 00   4) Net guaranteed amount $3,761. Mypay dfas mil login 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. Mypay dfas mil login 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. Mypay dfas mil login 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. Mypay dfas mil login See the discussion of expected return, later in this publication. Mypay dfas mil login Free IRS help. Mypay dfas mil login   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. Mypay dfas mil login Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Mypay dfas mil login The following discussions explain how to figure the expected return with each type of annuity. Mypay dfas mil login A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. Mypay dfas mil login Fixed period annuity. Mypay dfas mil login   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. Mypay dfas mil login It is the total amount you will get beginning at the annuity starting date. Mypay dfas mil login You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). Mypay dfas mil login 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. Mypay dfas mil login Single life annuity. Mypay dfas mil login   If you are to get annuity payments for the rest of your life, find your expected return as follows. Mypay dfas mil login You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. Mypay dfas mil login These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). Mypay dfas mil login   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. Mypay dfas mil login See Adjustments to Tables I, II, V, VI, and VIA following Table I. Mypay dfas mil login Example. Mypay dfas mil login Henry bought an annuity contract that will give him an annuity of $500 a month for his life. Mypay dfas mil login 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. Mypay dfas mil login 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. Mypay dfas mil login 2 multiple by +. Mypay dfas mil login 1. Mypay dfas mil login His expected return would then be $115,800 ($6,000 × 19. Mypay dfas mil login 3). Mypay dfas mil login Annuity for shorter of life or specified period. Mypay dfas mil login   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. Mypay dfas mil login To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. Mypay dfas mil login 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. Mypay dfas mil login Example. Mypay dfas mil login Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. Mypay dfas mil login She was age 65 at her birthday nearest the annuity starting date. Mypay dfas mil login 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. Mypay dfas mil login 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. Mypay dfas mil login See Special Elections, later. Mypay dfas mil login Joint and survivor annuities. Mypay dfas mil login   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. Mypay dfas mil login To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. Mypay dfas mil login If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. Mypay dfas mil login See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. Mypay dfas mil login Example. Mypay dfas mil login 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. Mypay dfas mil login At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. Mypay dfas mil login The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. Mypay dfas mil login 0 Expected return $132,000 Different payments to survivor. Mypay dfas mil login   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. Mypay dfas mil login Example 1. Mypay dfas mil login 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. Mypay dfas mil login 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. Mypay dfas mil login 0 Multiple for Gerald, age 70 (from Table V)   16. Mypay dfas mil login 0 Difference: Multiple applicable to Mary   6. Mypay dfas mil login 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. Mypay dfas mil login 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. Mypay dfas mil login 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. Mypay dfas mil login Your husband died while still employed. Mypay dfas mil login 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. Mypay dfas mil login Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. Mypay dfas mil login You were 50 years old at the annuity starting date. Mypay dfas mil login Marie was 16 and Jean was 14. Mypay dfas mil login 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. Mypay dfas mil login 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. Mypay dfas mil login 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. Mypay dfas mil login 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. Mypay dfas mil login Computation Under the General Rule Note. Mypay dfas mil login Variable annuities use a different computation for determining the exclusion amounts. Mypay dfas mil login See Variable annuities later. Mypay dfas mil login Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. Mypay dfas mil login   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. Mypay dfas mil login See Death benefit exclusion , earlier. Mypay dfas mil login Step 2. Mypay dfas mil login   Figure your expected return. Mypay dfas mil login Step 3. Mypay dfas mil login   Divide Step 1 by Step 2 and round to three decimal places. Mypay dfas mil login This will give you the exclusion percentage. Mypay dfas mil login Step 4. Mypay dfas mil login   Multiply the exclusion percentage by the first regular periodic payment. Mypay dfas mil login The result is the tax-free part of each pension or annuity payment. Mypay dfas mil login   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. Mypay dfas mil login 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. Mypay dfas mil login   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. Mypay dfas mil login Step 5. Mypay dfas mil login   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. Mypay dfas mil login This will give you the tax-free part of the total payment for the year. Mypay dfas mil login    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. Mypay dfas mil login This fractional amount is multiplied by your exclusion percentage to get the tax-free part. Mypay dfas mil login Step 6. Mypay dfas mil login   Subtract the tax-free part from the total payment you received. Mypay dfas mil login The rest is the taxable part of your pension or annuity. Mypay dfas mil login Example 1. Mypay dfas mil login You purchased an annuity with an investment in the contract of $10,800. Mypay dfas mil login Under its terms, the annuity will pay you $100 a month for life. Mypay dfas mil login The multiple for your age (age 65) is 20. Mypay dfas mil login 0 as shown in Table V. Mypay dfas mil login Your expected return is $24,000 (20 × 12 × $100). Mypay dfas mil login Your cost of $10,800, divided by your expected return of $24,000, equals 45. Mypay dfas mil login 0%. Mypay dfas mil login This is the percentage you will not have to include in income. Mypay dfas mil login 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. Mypay dfas mil login If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). Mypay dfas mil login Example 2. Mypay dfas mil login Gerald bought a joint and survivor annuity. Mypay dfas mil login Gerald's investment in the contract is $62,712 and the expected return is $121,200. Mypay dfas mil login The exclusion percentage is 51. Mypay dfas mil login 7% ($62,712 ÷ $121,200). Mypay dfas mil login Gerald will receive $500 a month ($6,000 a year). Mypay dfas mil login Each year, until his net cost is recovered, $3,102 (51. Mypay dfas mil login 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. Mypay dfas mil login If Gerald dies, his wife will receive $350 a month ($4,200 a year). Mypay dfas mil login If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. Mypay dfas mil login 7%). Mypay dfas mil login Each year, until the entire net cost is recovered, his wife will receive $2,171. Mypay dfas mil login 40 (51. Mypay dfas mil login 7% of her payments received of $4,200) tax free. Mypay dfas mil login She will include $2,028. Mypay dfas mil login 60 ($4,200 − $2,171. Mypay dfas mil login 40) in her income tax return. Mypay dfas mil login Example 3. Mypay dfas mil login 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. Mypay dfas mil login Your two daughters each receive annual annuities of $1,800 until they reach age 18. Mypay dfas mil login Your husband contributed $25,576 to the plan. Mypay dfas mil login You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. Mypay dfas mil login 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. Mypay dfas mil login The exclusion percentage of 18. Mypay dfas mil login 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. Mypay dfas mil login Each full year $864 (18. Mypay dfas mil login 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. Mypay dfas mil login Each year, until age 18, $324 (18. Mypay dfas mil login 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. Mypay dfas mil login Part-year payments. Mypay dfas mil login   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. Mypay dfas mil login   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. Mypay dfas mil login 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. Mypay dfas mil login   If you received a fractional payment, follow Step 5, discussed earlier. Mypay dfas mil login This gives you the tax-free part of your total payment. Mypay dfas mil login Example. Mypay dfas mil login On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Mypay dfas mil login The applicable multiple from Table V is 23. Mypay dfas mil login 3 (age 61). Mypay dfas mil login Her expected return is $34,950 ($125 × 12 × 23. Mypay dfas mil login 3). Mypay dfas mil login Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. Mypay dfas mil login 1%. Mypay dfas mil login Each payment received will consist of 63. Mypay dfas mil login 1% return of cost and 36. Mypay dfas mil login 9% taxable income, until her net cost of the contract is fully recovered. Mypay dfas mil login During the first year, Mary received three payments of $125, or $375, of which $236. Mypay dfas mil login 63 (63. Mypay dfas mil login 1% × $375) is a return of cost. Mypay dfas mil login The remaining $138. Mypay dfas mil login 37 is included in income. Mypay dfas mil login Increase in annuity payments. Mypay dfas mil login   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. Mypay dfas mil login All increases in the installment payments are fully taxable. Mypay dfas mil login   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. Mypay dfas mil login 72-5(a)(5) of the regulations. Mypay dfas mil login Example. Mypay dfas mil login Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. Mypay dfas mil login In figuring the taxable part, Joe elects to use Tables V through VIII. Mypay dfas mil login The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. Mypay dfas mil login His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. Mypay dfas mil login 0 × $1,764 annual payment). Mypay dfas mil login The exclusion percentage is $7,938 ÷ $35,280, or 22. Mypay dfas mil login 5%. Mypay dfas mil login During the year he received 11 monthly payments of $147, or $1,617. Mypay dfas mil login Of this amount, 22. Mypay dfas mil login 5% × $147 × 11 ($363. Mypay dfas mil login 83) is tax free as a return of cost and the balance of $1,253. Mypay dfas mil login 17 is taxable. Mypay dfas mil login Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). Mypay dfas mil login The tax-free part is still only 22. Mypay dfas mil login 5% of the annuity payments as of the annuity starting date (22. Mypay dfas mil login 5% × $147 × 12 = $396. Mypay dfas mil login 90 for a full year). Mypay dfas mil login The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. Mypay dfas mil login Variable annuities. Mypay dfas mil login   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. Mypay dfas mil login   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. Mypay dfas mil login If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. Mypay dfas mil login Example. Mypay dfas mil login Frank purchased a variable annuity at age 65. Mypay dfas mil login The total cost of the contract was $12,000. Mypay dfas mil login The annuity starting date is January 1 of the year of purchase. Mypay dfas mil login His annuity will be paid, starting July 1, in variable annual installments for his life. Mypay dfas mil login 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. Mypay dfas mil login   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. Mypay dfas mil login 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. Mypay dfas mil login The result is added to the previously figured periodic tax-free part. Mypay dfas mil login The sum is the amount of each future payment that will be tax free. Mypay dfas mil login Example. Mypay dfas mil login 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. Mypay dfas mil login Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. Mypay dfas mil login 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. Mypay dfas mil login 00 Amount received in second year 500. Mypay dfas mil login 00 Difference $100. Mypay dfas mil login 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. Mypay dfas mil login 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. Mypay dfas mil login 4) $5. Mypay dfas mil login 43 Revised annual tax-free part for third and later years ($600 + $5. Mypay dfas mil login 43) $605. Mypay dfas mil login 43 Amount taxable in third year ($1,200 − $605. Mypay dfas mil login 43) $594. Mypay dfas mil login 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. Mypay dfas mil login 72–4(d)(3) of the Income Tax Regulations. Mypay dfas mil login The statement must also show the following information: The annuity starting date and your age on that date. Mypay dfas mil login The first day of the first period for which you received an annuity payment in the current year. Mypay dfas mil login Your investment in the contract as originally figured. Mypay dfas mil login 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. Mypay dfas mil login Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. Mypay dfas mil login Exclusion limited to net cost. Mypay dfas mil login   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). Mypay dfas mil login This is the unrecovered investment in the contract as of the annuity starting date. Mypay dfas mil login   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. Mypay dfas mil login This deduction is not subject to the 2%-of-adjusted-gross-income limit. Mypay dfas mil login Example 1. Mypay dfas mil login Your annuity starting date is after 1986. Mypay dfas mil login Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. Mypay dfas mil login There is no refund feature. Mypay dfas mil login Your monthly annuity payment is $833. Mypay dfas mil login 33. Mypay dfas mil login Your exclusion ratio is 12% and you exclude $100 a month. Mypay dfas mil login Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. Mypay dfas mil login Thereafter, your annuity payments are fully taxable. Mypay dfas mil login Example 2. Mypay dfas mil login 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. Mypay dfas mil login The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. Mypay dfas mil login The exclusion ratio is 10. Mypay dfas mil login 8%, and your monthly exclusion is $90. Mypay dfas mil login After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). Mypay dfas mil login 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. Mypay dfas mil login Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. Mypay dfas mil login Exclusion not limited to net cost. Mypay dfas mil login   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. Mypay dfas mil login If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. Mypay dfas mil login The total exclusion may be more than your investment in the contract. Mypay dfas mil login 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. Mypay dfas mil login 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. Mypay dfas mil login These tables correspond to the old Tables I through IV. Mypay dfas mil login In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. Mypay dfas mil login If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. Mypay dfas mil login 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). Mypay dfas mil login 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. Mypay dfas mil login Contributions made both before July 1986 and after June 1986. Mypay dfas mil login   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. Mypay dfas mil login (See the examples below. Mypay dfas mil login )    Making the election. Mypay dfas mil login 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. Mypay dfas mil login 72–6 of the Income Tax Regulations. Mypay dfas mil login ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. Mypay dfas mil login   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. Mypay dfas mil login 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. Mypay dfas mil login    Advantages of election. Mypay dfas mil login 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. Mypay dfas mil login    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. Mypay dfas mil login 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. Mypay dfas mil login   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. Mypay dfas mil login Example 1. Mypay dfas mil login Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. Mypay dfas mil login Payment of the $42,000 contribution is guaranteed under a refund feature. Mypay dfas mil login Bill is 55 years old as of the annuity starting date. Mypay dfas mil login 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. Mypay dfas mil login       Pre- July 1986   Post- June 1986 A. Mypay dfas mil login 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. Mypay dfas mil login 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. Mypay dfas mil login 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. Mypay dfas mil login Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. Mypay dfas mil login 7   28. Mypay dfas mil login 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. Mypay dfas mil login Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . Mypay dfas mil login 079   . Mypay dfas mil login 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). Mypay dfas mil login The taxable part of his annuity is $22,080 ($24,000 minus $1,920). Mypay dfas mil login 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). Mypay dfas mil login Example 2. Mypay dfas mil login Al is age 62 at his nearest birthday to the annuity starting date. Mypay dfas mil login Al's wife is age 60 at her nearest birthday to the annuity starting date. Mypay dfas mil login 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. Mypay dfas mil login The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. Mypay dfas mil login Al makes the election described in Example 1 . Mypay dfas mil login For purposes of this example, assume the refund feature adjustment is zero. Mypay dfas mil login If an adjustment is required, IRS will figure the amount. Mypay dfas mil login See Requesting a Ruling on Taxation of Annuity near the end of this publication. Mypay dfas mil login       Pre-  July 1986   Post-  June 1986 A. Mypay dfas mil login 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. Mypay dfas mil login 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. Mypay dfas mil login Expected return         1) Multiple for both annuitants from Tables II and VI 25. Mypay dfas mil login 4   28. Mypay dfas mil login 8   2) Multiple for first annuitant from Tables I and V 16. Mypay dfas mil login 9   22. Mypay dfas mil login 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. Mypay dfas mil login 5   6. Mypay dfas mil login 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. Mypay dfas mil login Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . Mypay dfas mil login 209   . Mypay dfas mil login 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). Mypay dfas mil login The taxable part of his annuity is $9,216 ($12,000 − $2,784). Mypay dfas mil login 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. Mypay dfas mil login After Al's death, his widow will apply the same exclusion percentages (20. Mypay dfas mil login 9% and 2. Mypay dfas mil login 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. Mypay dfas mil login Annuity received after June 30, 1986. Mypay dfas mil login   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. Mypay dfas mil login Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. Mypay dfas mil login    Make the election by attaching the following statement to your income tax return. Mypay dfas mil login    “I elect, under section 1. Mypay dfas mil login 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. Mypay dfas mil login ”   The statement must also include your name, address, and social security number. Mypay dfas mil login   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. Mypay dfas mil login Disqualifying form of payment or settlement. Mypay dfas mil login   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. Mypay dfas mil login See regulations section 1. Mypay dfas mil login 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. Mypay dfas mil login You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. Mypay dfas mil login Worksheets for Determining Taxable Annuity Worksheets I and II. Mypay dfas mil login   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. Mypay dfas mil login 72–6(d)(6) Election. Mypay dfas mil login Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Mypay dfas mil login 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. Mypay dfas mil login   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Mypay dfas mil login )             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. Mypay dfas mil login If not, the IRS will calculate the refund feature percentage. Mypay dfas mil login             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Mypay dfas mil login   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. Mypay dfas mil login   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. Mypay dfas mil login   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. Mypay dfas mil login     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Mypay dfas mil login 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. Mypay dfas mil login   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Mypay dfas mil login )             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. Mypay dfas mil login If not, the IRS will calculate the refund feature percentage. Mypay dfas mil login             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Mypay dfas mil login   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. Mypay dfas mil login   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. Mypay dfas mil login 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. Mypay dfas mil login   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. Mypay dfas mil login   Actuarial Tables Please click here for the text description of the image. Mypay dfas mil login Actuarial Tables Please click here for the text description of the image. Mypay dfas mil login Actuarial Tables Please click here for the text description of the image. Mypay dfas mil login Actuarial tables Please click here for the text description of the image. 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Mypay dfas mil login 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. Mypay dfas mil login If you make this request, you are asking for a ruling. Mypay dfas mil login User fee. Mypay dfas mil login   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. Mypay dfas mil login You should call the IRS for the proper fee. Mypay dfas mil login A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. Mypay dfas mil login Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. Mypay dfas mil login O. Mypay dfas mil login 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. Mypay dfas mil login When to make the request. Mypay dfas mil login   Please note that requests sent between February 1 and April 15 may experience some delay. Mypay dfas mil login We process requests in the order received, and we will reply to your request as soon as we can process it. Mypay dfas mil login 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. Mypay dfas mil login S. Mypay dfas mil login Individual Income Tax Return, to get an extension of time to file. Mypay dfas mil login Information you must furnish. Mypay dfas mil login   You must furnish the information listed below so the IRS can comply with your request. Mypay dfas mil login Failure to furnish the information will result in a delay in processing your request. Mypay dfas mil login 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. Mypay dfas mil login Copies of any documents showing distributions, annuity rates, and annuity options available to you. Mypay dfas mil login A copy of any Form 1099–R you received since your annuity began. Mypay dfas mil login A statement indicating whether you have filed your return for the year for which you are making the request. Mypay dfas mil login If you have requested an extension of time to file that return, please indicate the extension date. Mypay dfas mil login Your daytime phone number. Mypay dfas mil login Your current mailing address. Mypay dfas mil login A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. Mypay dfas mil login Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. Mypay dfas mil login A completed Tax Information Sheet (or facsimile) shown on the next page. Mypay dfas mil login Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. Mypay dfas mil login This statement must be signed by the retiree or the survivor annuitant. Mypay dfas mil login It cannot be signed by a representative. Mypay dfas mil login Tax Information Sheet Please click here for the text description of the image. Mypay dfas mil login Tax Information Sheet Please click here for the text description of the image. Mypay dfas mil login 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. Mypay dfas mil login Free help with your tax return. Mypay dfas mil login   You can get free help preparing your return nationwide from IRS-certified volunteers. Mypay dfas mil login The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Mypay dfas mil login The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Mypay dfas mil login 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. Mypay dfas mil login In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Mypay dfas mil login To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Mypay dfas mil login gov, download the IRS2Go app, or call 1-800-906-9887. Mypay dfas mil login   As part of the TCE program, AARP offers the Tax-Aide counseling program. Mypay dfas mil login To find the nearest AARP Tax-Aide site, visit AARP's website at www. Mypay dfas mil login aarp. Mypay dfas mil login org/money/taxaide or call 1-888-227-7669. Mypay dfas mil login For more information on these programs, go to IRS. Mypay dfas mil login gov and enter “VITA” in the search box. Mypay dfas mil login Internet. Mypay dfas mil login    IRS. Mypay dfas mil login gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Mypay dfas mil login Download the free IRS2Go app from the iTunes app store or from Google Play. Mypay dfas mil login 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. Mypay dfas mil login Check the status of your 2013 refund with the Where's My Refund? application on IRS. Mypay dfas mil login gov or download the IRS2Go app and select the Refund Status option. Mypay dfas mil login The IRS issues more than 9 out of 10 refunds in less than 21 days. Mypay dfas mil login 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. 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Mypay dfas mil login gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Mypay dfas mil login You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Mypay dfas mil login The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Mypay dfas mil login When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Mypay dfas mil login Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. 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