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Waiver of required minimum distribution (RMD) rules for certain retirement plans and IRAs for 2009. No RMD is required from your defined contribution plan or IRA for 2009. For more information, see Waiver of required minimum distributions (RMDs) for 2009 , under Rollovers, later.
Rollovers to Roth IRAs. For tax years starting in 2010, the $100,000 modified AGI limit on rollovers from eligible retirement plans to Roth IRAs is eliminated and married taxpayers filing a separate return can now roll over amounts to a Roth IRA.Also, for any 2010 rollover from an eligible retirement plan (other than a Roth IRA) to a Roth IRA, any amounts that would be included as income will be included in income in equal amounts in 2011 and 2012. You can choose to include the entire amount in income in 2010.
Hurricane and disaster-related tax relief. Special rules apply to retirement funds received by qualified individuals who suffered an economic loss as a result of Hurricane Katrina, Rita, or Wilma; the storms that began on May 4, 2007 in the Kansas disaster area; and the severe storms in the Midwestern disaster areas. For more information on these special rules see Hurricane-Related Relief, Relief for Kansas Disaster Area, and Relief for Midwestern Disaster Areas .
This publication discusses the tax treatment of distributions you receive from pension and annuity plans and also shows you how to report the income on your federal income tax return. How these distributions are taxed depends on whether they are periodic payments (amounts received as an annuity) that are paid at regular intervals over several years or nonperiodic payments (amounts not received as an annuity).
This publication contains information that you need to understand the following topics.
The following topics are not discussed in this publication.
See How To Get Tax Help near the end of this publication for information about getting publications and forms.
Some of the terms used in this publication are defined in the following paragraphs.
A pension is generally a series of definitely determinable payments made to you after you retire from work. Pension payments are made regularly and are based on such factors as years of service and prior compensation.
An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. They can be either fixed (under which you receive a definite amount) or variable (not fixed). You can buy the contract alone or with the help of your employer.
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. 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). To determine whether your plan is a qualified plan, check with your employer or the plan administrator.
A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements.
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) or 403(b) plan designated as Roth contributions. Elective deferrals that are designated as Roth contributions are included in your income. However, qualified distributions are not included in your income. You should check with your plan administrator to determine if your plan will accept designated Roth contributions.
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. Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants.
Pensions and annuities include the following types.
You receive definite amounts at regular intervals for a specified length of time.
You receive definite amounts at regular intervals for life. The payments end at death.
The first annuitant receives a definite amount at regular intervals for life. After he or she dies, a second annuitant receives a definite amount at regular intervals for life. The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant.
You receive payments that may vary in amount for a specified length of time or for life. 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.
You receive disability payments because you retired on disability and have not reached minimum retirement age.
You may receive employee plan benefits from more than one program under a single trust or plan of your employer. 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. Also, you may be considered to have received more than one pension or annuity. Your former employer or the plan administrator should be able to tell you if you have more than one contract.
Your employer set up a noncontributory profit-sharing plan for its employees. The plan provides that the amount held in the account of each participant will be paid when that participant retires. 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.
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. Under the pension plan, however, a formula determines the amount of the pension benefits. The amount of contributions is the amount necessary to provide that pension.
Each plan is a separate program and a separate contract. 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.
Distributions from a designated Roth account are treated separately from other distributions from the plan.
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. 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. A QDRO may not award an amount or form of benefit that is not available under the plan. 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. 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. The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. The denominator is the present value of all benefits payable to the participant. A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant.
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. 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. 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. The earnings are not taxed until distributed either in a withdrawal or in annuity payments. The taxable part of a distribution is treated as ordinary income.
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.
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. 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. You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you.
This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525.
To find out if your plan is an eligible plan, check with your employer. Plans that are not eligible section 457 plans include the following:
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. 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. Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled.
You may be entitled to a tax credit if you were permanently and totally disabled when you retired. For information on this credit, see Publication 524.Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b.
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. For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks.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. The premiums can be for coverage for you, your spouse, or dependents. The distribution must be made directly from the plan to the insurance provider. You can exclude from income the smaller of the amount of the insurance premiums or $3,000. You can only make this election for amounts that would otherwise be included in your income. The amount excluded from your income cannot be used to claim a medical expense deduction.
An eligible retirement plan is a governmental plan that is:
If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. The amount shown in box 2a of Form 1099-R does not reflect this exclusion. Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Enter “PSO” next to the appropriate line on which you report the taxable amount.
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.
Benefits paid under the Railroad Retirement Act fall into two categories. These categories are treated differently for income tax purposes.
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. 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. If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2009, 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.S. Railroad Retirement Board (RRB).
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.
The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. 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. (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R.) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. Form RRB-1099-R is used for U.S. citizens, resident aliens, and nonresident aliens.
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.S. consulate/Embassy if you reside outside the United States. You can visit the RRB on the Internet at www.rrb.gov.
Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. This is the number under which the RRB paid your benefits. Your payee code follows your claim number and is the last number in this box. It is used by the RRB to identify you under your claim number. In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box.
This is the gross amount of the NSSEB and tier 2 benefit you received in 2009, less any 2009 benefits you repaid in 2009. (Any benefits you repaid in 2009 for an earlier year or for an unknown year are shown in box 8.) This amount is the total contributory pension paid in 2009. It may be partly taxable and partly tax free or fully taxable. 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.
This is the gross amount of vested dual benefit (VDB) payments paid in 2009, less any 2009 VDB payments you repaid in 2009. It is fully taxable. VDB payments you repaid in 2009 for an earlier year or for an unknown year are shown in box 8.
The amounts shown in boxes 4 and 5 may represent payments for 2009 and/or other years after 1983.
This is the gross amount of supplemental annuity benefits paid in 2009, less any 2009 supplemental annuity benefits you repaid in 2009. It is fully taxable. Supplemental annuity benefits you repaid in 2009 for an earlier year or for an unknown year are shown in box 8.
Your retirement plan distributions are subject to federal income tax withholding. However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. (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.) 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. See Estimated tax , later.
The withholding rules apply to the taxable part of payments you receive from:
For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company.
There will be no withholding on any part of a distribution that (it is reasonable to believe) will not be includible in gross income.You must file a new withholding certificate to change the amount of withholding.
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. Generally, you must make estimated tax payments for 2010 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:
Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). 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. Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity.
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). To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. This includes the amounts your employer contributed that were taxable to you when paid. (However, see Foreign employment contributions , later.) 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). It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits).
From this total cost you must subtract the following amounts.
The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments.
Form 1099-R. If you began receiving periodic payments of a life annuity in 2009, the payer should show your total contributions to the plan in box 9b of your 2009 Form 1099-R.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.
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. The annuity starting date is July 1. 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.
Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements.
If you worked abroad, your cost includes amounts contributed by your employer that were not includible in your gross income. This applies to contributions that were made either:
In determining your cost, special rules apply if you are a U.S. citizen or resident alien who received distributions in 2009 from a plan to which contributions were made while you were a nonresident alien. Your contributions and your employer's contributions are not included in your cost if the contribution:
This section explains how the periodic payments you receive from a pension or annuity plan are taxed. 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). These payments are also known as amounts received as an annuity. If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later.
In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. 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).
If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. This applies to both your cost in the account and income earned on that account. A qualified distribution is generally a distribution that is:
If the distribution is not a qualified distribution, the rules discussed in this section apply. The designated Roth account is treated as a separate contract.
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. Therefore, for designated Roth contributions made in 2009, the first year for which a qualified distribution can be made is 2014. 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.
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).
Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a.
Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. Accumulated deductible voluntary employee contributions include net earnings on the contributions. If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment.
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. 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. The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier).
You figure the tax-free part of the payment using one of the following methods.
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.
If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately.
Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. Once your annuity starting date is determined, it does not change. 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. That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet.
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. 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. This deduction is not subject to the 2%-of-adjusted-gross-income limit.
Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. The total cost of your annuity is $12,000. Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). After that, your annuity payments are generally fully taxable.
The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. You have recovered tax free only $9,600 (8 × $1,200) of your cost. An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return.
If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. 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. The total exclusion may be more than your cost.
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. 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. For any other annuity, this number is the number of monthly annuity payments under the contract.
You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions.
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. 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.
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. 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.
Complete Worksheet A in the back of this publication to figure your taxable annuity for 2009. Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. 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. 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. Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet.
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. Enter on line 3 the number shown for your age on your annuity starting date. This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996.
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. Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. 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. 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. Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. 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. This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996.
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.
Bill Smith, age 65, began receiving retirement benefits in 2009 under a joint and survivor annuity. Bill's annuity starting date is January 1, 2009. The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. 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.
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. 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. His completed worksheet is shown below.
Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. The full amount of any annuity payments received after 310 payments are paid must be included in gross income.
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. This deduction is not subject to the 2%-of-adjusted- gross-income limit.
| 1. | Enter the total pension or annuity payments received this year. Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a | 1. | $14,400 |
| 2. | Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion.* See Cost (Investment in the Contract) earlier | 2. | 31,000 |
| Note. If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Otherwise, go to line 3. | |||
| 3. | Enter the appropriate number from Table 1 below. 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. | 310 |
| 4. | Divide line 2 by the number on line 3 | 4. | 100 |
| 5. | Multiply line 4 by the number of months for which this year's payments were made. If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Otherwise, go to line 6 | 5. | 1,200 |
| 6. | Enter any amount previously recovered tax free in years after 1986. This is the amount shown on line 10 of your worksheet for last year | 6. | -0- |
| 7. | Subtract line 6 from line 2 | 7. | 31,000 |
| 8. | Enter the smaller of line 5 or line 7 | 8. | 1,200 |
| 9. | Taxable amount for year. Subtract line 8 from line 1. Enter the result, but not less than zero. Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. 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. | $13,200 |
| 10. | Was your annuity starting date before 1987? □ Yes. STOP. Do not complete the rest of this worksheet. □ No. Add lines 6 and 8. This is the amount you have recovered tax free through 2009. You will need this number if you need to fill out this worksheet next year | 10. | 1,200 |
| 11. | Balance of cost to be recovered. Subtract line 10 from line 2. If zero, you will not have to complete this worksheet next year. The payments you receive next year will generally be fully taxable | 11. | $29,800 |
| * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. | |||
| Table 1 for Line 3 Above | ||||
| AND your annuity starting date was— | ||||
| IF the age at annuity starting date was... | BEFORE November 19, 1996, enter on line 3... | AFTER November 18, 1996, enter on line 3... | ||
| 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... | THEN enter on line 3... | |||
| 110 or under | 410 | |||
| 111-120 | 360 | |||
| 121-130 | 310 | |||
| 131-140 | 260 | |||
| 141 or older | 210 |
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. Figure your share by taking the following steps.
Replace the amount on line 4 of the worksheet with the result in (3) above. Enter that amount on line 4 of your worksheet each year.
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. Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS.
You must use the General Rule if you receive pension or annuity payments from:
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. You also had to use it for any fixed-period annuity. If you did not have to use the General Rule, you could have chosen to use it. 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. 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.
This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. Nonperiodic distributions are also known as amounts not received as an annuity. They include all payments other than periodic payments and corrective distributions.
For example, the following items are treated as nonperiodic distributions.
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. 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 and, if it is made under a nonqualified plan, 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.
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. See Rollovers, later. 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. See Lump-Sum Distributions, later.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.
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. The NUA is the net increase in the securities' value while they were in the trust. This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. 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. 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:
If you receive a nonperiodic payment from your annuity contract on or after the annuity starting date, you generally must include all of the payment in gross income. For example, a cost-of-living increase in your pension after the annuity starting date is an amount not received as an annuity and, as such, is fully taxable.
If the annuity payments you receive are reduced because you received a nonperiodic distribution, you can exclude part of the nonperiodic distribution from gross income. The part you can exclude is equal to your cost in the contract reduced by any tax-free amounts you previously received under the contract, multiplied by a fraction. The numerator is the reduction in each annuity payment because of the nonperiodic distribution. The denominator is the full unreduced amount of each annuity payment originally provided for.
You may receive an amount on or after the annuity starting date that fully satisfies the payer's obligation under the contract. The amount may be a refund of what you paid for the contract or for the complete surrender, redemption, or maturity of the contract. Include the amount in gross income only to the extent that it exceeds the remaining cost of the contract.
If you receive a nonperiodic distribution before the annuity starting date from a qualified retirement plan, you generally can allocate only part of it to the cost of the contract. You exclude from your gross income the part that you allocate to the cost. You include the remainder in your gross income.
For this purpose, a qualified retirement plan is:
Use the following formula to figure the tax-free amount of the distribution.
| Amount received | x | Cost of contract | = | Tax-free amount | |
| Account balance |
For this purpose, your account balance includes only amounts to which you have a nonforfeitable right (a right that cannot be taken away).
Ann Brown received a $50,000 distribution from her retirement plan before her annuity starting date. She had $10,000 invested (cost) in the plan. Her account balance was $100,000. She can exclude $5,000 of the $50,000 distribution, figured as follows:
| $50,000 | x | $10,000 | = | $5,000 | |
| $100,000 |
Under a defined contribution plan, your contributions (and income allocable to them) may be treated as a separate contract for figuring the taxable part of any distribution. A defined contribution plan is a plan in which you have an individual account. Your benefits are based only on the amount contributed to the account and the income, expenses, etc., allocated to the account.
Ryan participates in a defined contribution plan that treats employee contributions and earnings allocable to them as a separate contract. He received a non-annuity distribution of $5,000 before his annuity starting date. He had made after-tax contributions of $10,000. The earnings allocable to his contributions were $2,500. His employer also contributed $10,000. The earnings allocable to the employer contributions were $2,500. To determine the tax-free amount of Ryan's distribution use the same formula shown above. However, because employee contributions are treated as a separate contract the account balance would be the total of Ryan's contributions and allocable earnings. Thus the tax-free amount would be $5,000 × ($10,000 ÷ $12,500) = $4,000. The taxable amount would be $1,000 ($5,000 − $4,000). If the employee contributions were not treated as a separate contract, the tax-free amount would be $2,000 ($5,000 × ($10,000 ÷ $25,000)) and the taxable amount would be $3,000 ($5,000 − $2,000).
If you contributed before 1987 to a pension plan that, as of May 5, 1986, permitted you to withdraw your contributions before your separation from service, any distribution before your annuity starting date is tax free to the extent that it, when added to earlier distributions received after 1986, does not exceed your cost as of December 31, 1986. Apply the allocation described in the preceding discussion only to any excess distribution.
If you receive a nonperiodic distribution before the annuity starting date from a plan other than a qualified retirement plan, it is allocated first to earnings (the taxable part) and then to the cost of the contract (the tax-free part). This allocation rule applies, for example, to a commercial annuity contract you bought directly from the issuer. You include in your gross income the smaller of:
You bought an annuity from an insurance company. Before the annuity starting date under your annuity contract, you received a $7,000 distribution. At the time of the distribution, the annuity had a cash value of $16,000 and your investment in the contract was $10,000. The distribution is allocated first to earnings, so you must include $6,000 ($16,000 − $10,000) in your gross income. The remaining $1,000 ($7,000 − $6,000) is a tax-free return of part of your investment.
Certain nonperiodic distributions received before the annuity starting date are not subject to the allocation rule in the preceding discussion. Instead, you include the amount of the payment in gross income only to the extent that it exceeds the cost of the contract. This exception applies to the following distributions.
If you borrow money from your retirement plan, you must treat the loan as a nonperiodic distribution from the plan unless it qualifies for the exception to this loan-as-distribution rule explained later. This treatment also applies to any loan under a contract purchased under your retirement plan, and to the value of any part of your interest in the plan or contract that you pledge or assign (or agree to pledge or assign). It applies to loans from both qualified and nonqualified plans, including commercial annuity contracts you purchase directly from the issuer. Further, it applies if you renegotiate, extend, renew, or revise a loan that qualified for the exception below if the altered loan does not qualify. In that situation, you must treat the outstanding balance of the loan as a distribution on the date of the transaction.
You determine how much of the loan is taxable using the allocation rules for nonperiodic distributions discussed under Figuring the Taxable Amount , earlier. The taxable part may be subject to the additional tax on early distributions. It is not an eligible rollover distribution and does not qualify for the 10-year tax option.
At least part of certain loans under a qualified employee plan, qualified employee annuity, tax-sheltered annuity (403(b) plan), or government plan is not treated as a distribution from the plan. This exception to the loan-as-distribution rule applies only to a loan that either:
You must reduce the $50,000 amount if you already had an outstanding loan from the plan during the 1-year period ending the day before you took out the loan. The amount of the reduction is your highest outstanding loan balance during that period minus the outstanding balance on the date you took out the new loan. If this amount is zero or less, ignore it.
To qualify for the exception to the loan-as-distribution rule, the loan must require substantially level payments at least quarterly over the life of the loan. If the loan is from a designated Roth account, the payments must be satisfied separately for that part of the loan and for the part of the loan from other accounts under the plan. This level payment requirement does not apply to the period in which you are on a leave of absence without pay or with a rate of pay that is less than the required installment. Generally, this leave of absence must not be longer than 1 year. You must repay the loan within 5 years from the date of the loan (unless the loan was used to acquire your main home). Your installment payments after the leave ends must not be less than your original payments. However, if your plan suspends your loan payments for any part of the period during which you are in the uniformed services, you will not be treated as having received a distribution even if the suspension is for more than 1 year and the term of the loan is extended. The loan payments must resume upon completion of such period and the loan must be repaid in substantially level installments within 5 years from the date of the loan (unless the loan was used to acquire your main home) plus the period of suspension.
On May 1, 2009, you borrowed $40,000 from your retirement plan. The loan was to be repaid in level monthly installments over 5 years. The loan was not used to acquire your main home. You make nine monthly payments and start an unpaid leave of absence that lasts for 12 months. You were not in a uniformed service during this period. After the leave period ends and you resume active employment, you resume making repayments on the loan. You must repay this loan by April 30, 2014 (5 years from the date of this loan). You can increase your monthly installments or you can make the original monthly installments and on April 30, 2014, pay the balance.
The facts are the same as in Example 1, except that you are on a leave of absence performing service in the uniformed services for 2 years. The loan payments were suspended for that period. You must resume making loan payments at the end of that period and the loan must be repaid by April 30, 2016 (5 years from the date of the loan plus the period of suspension).
In determining loan balances for purposes of applying the exception to the loan-as-distribution rule, you must add the balances of all your loans from all plans of your employer and from all plans of your employers who are treated as a single employer. Treat separate employers' plans as plans of a single employer if they are treated that way under other qualified retirement plan rules because the employers are related. Employers are related if they are:
An affiliated service group generally is two or more service organizations whose relationship involves an ownership connection. Their relationship also includes the regular or significant performance of services by one organization for or in association with another.
If the loan from a qualified plan is not treated as a distribution because the exception applies, you cannot deduct any of the interest on the loan during any period that:
If your loan is treated as a distribution, you must reduce your investment in the contract to the extent that the distribution is tax free under the allocation rules for qualified plans explained earlier. Repayments of the loan increase your investment in the contract to the extent that the distribution is taxable under those rules. If you receive a loan under a nonqualified plan other than a 403(b) plan, including a commercial annuity contract that you purchase directly from the issuer, you increase your investment in the contract to the extent that the distribution is taxable under the general allocation rule for nonqualified plans explained earlier. Repayments of the loan do not affect your investment in the contract. However, if the distribution is excepted from the general allocation rule (for example, because it is made under a contract entered into before August 14, 1982), you reduce your investment in the contract to the extent that the distribution is tax free and increase it for loan repayments to the extent that the distribution is taxable.
If you transfer without full and adequate consideration an annuity contract issued after April 22, 1987, you are treated as receiving a nonperiodic distribution. The distribution equals the excess of:
This rule does not apply to transfers between spouses or transfers between former spouses incident to a divorce.
If you transfer a full or partial interest in a tax-sheltered annuity that is not subject to restrictions on early distributions to another tax-sheltered annuity, the transfer qualifies for nonrecognition of gain or loss.
If you exchange an annuity contract issued by a life insurance company that is subject to a rehabilitation, conservatorship, or similar state proceeding for an annuity contract issued by another life insurance company, the exchange qualifies for nonrecognition of gain or loss. The exchange is tax free even if the new contract is funded by two or more payments from the old annuity contract. This also applies to an exchange of a life insurance contract for a life insurance, endowment, annuity, or a qualified long-term care insurance contract.
If you transfer part of the cash surrender value of an existing annuity contract for a new annuity contract issued by another insurance company, the transfer qualifies for nonrecognition of gain or loss. The funds must be transferred directly between the insurance companies. Your investment in the original contract immediately before the exchange is allocated between the contracts based on the percentage of the cash surrender value allocated to each contract.
You own an annuity contract issued by ABC Insurance. You assign 60% of the cash surrender value of that contract to DEF Insurance to purchase an annuity contract. The funds are transferred directly between the insurance companies. You do not recognize any gain or loss on the transaction. After the exchange, your investment in the new contract is equal to 60% of your investment in the old contract immediately before the exchange. Your investment in the old contract is equal to 40% of your original investment in that contract.
If you receive cash from the surrender of one contract and invest the cash in another contract, you generally do not have a tax-free transfer. However, you can elect to receive tax-free treatment for a cash distribution from an insurance company that is subject to a rehabilitation, conservatorship, insolvency, or similar state proceeding if all of the following conditions are met.
A lump-sum distribution is the distribution or payment in one tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans). A distribution from a nonqualified plan (such as a privately purchased commercial annuity or a section 457 deferred compensation plan of a state or local government or tax-exempt organization) cannot qualify as a lump-sum distribution.
The participant's entire balance from a plan does not include certain forfeited amounts. It also does not include any deductible voluntary employee contributions allowed by the plan after 1981 and before 1987.
If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. You may be able to use the 10-year tax option, discussed later, to figure tax on the ordinary income part.
Each individual, estate, or trust who receives part of a lump-sum distribution on behalf of a plan participant who was born before January 2, 1936, can choose whether to elect the optional methods for the part each received. However, if two or more trusts receive the distribution, the plan participant or the personal representative of a deceased participant must make the choice.
Use Form 4972 to figure the separate tax on a lump-sum distribution using the optional methods. The tax figured on Form 4972 is added to the regular tax figured on your other income. This may result in a smaller tax than you would pay by including the taxable amount of the distribution as ordinary income in figuring your regular tax.
A separated employee's vested percentage in his or her retirement benefit may increase if he or she is rehired by the employer within five years following separation from service. This possibility does not prevent a distribution made before reemployment from qualifying as a lump-sum distribution. However, if the employee elected an optional method of figuring the tax on the distribution and his or her vested percentage in the previous retirement benefit increases after reemployment, the employee must recapture the tax saved. This is done by increasing the tax for the year in which the increase in vesting first occurs.
The following distributions do not qualify as lump-sum distributions for the capital gain treatment or 10-year tax option.
If you receive a lump-sum distribution, you may have the following options for how to treat the taxable part.
The first three options are explained in the following discussions.
You must decide to use the tax options before the end of the time, including extensions, for making a claim for credit or refund of tax. This is usually 3 years after the date the return was filed or 2 years after the date the tax was paid, whichever is later. (Returns filed before their due date are considered filed on their due date.)
The taxable part of a lump-sum distribution is the employer's contributions and income earned on your account. You may recover your cost in the lump sum and any net unrealized appreciation (NUA) in employer securities tax free.
In general, your cost is the total of:
You must reduce this cost by amounts previously distributed tax free.
Capital gain treatment applies only to the taxable part of a lump-sum distribution resulting from participation in the plan before 1974. The amount treated as capital gain is taxed at a 20% rate. You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936.
Complete Part II of Form 4972 to choose the 20% capital gain election.
| Capital Gain: | |||
| Total Taxable Amount | × | Months of active participation before 1974 | |
| Total months of active participation | |||
| Ordinary Income: | |||
| Total Taxable Amount | × | Months of active participation after 1973 | |
| Total months of active participation |
The 10-year tax option is a special formula used to figure a separate tax on the ordinary income part of a lump-sum distribution. You pay the tax only once, for the year in which you receive the distribution, not over the next 10 years. You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936.
The ordinary income part of the distribution is the amount shown in box 2a of the Form 1099-R given to you by the payer, minus the amount, if any, shown in box 3. You can also treat the capital gain part of the distribution (box 3 of Form 1099-R) as ordinary income for the 10-year tax option if you do not choose capital gain treatment for that part.
Complete Part III of Form 4972 to choose the 10-year tax option. You must use the special Tax Rate Schedule shown in the instructions for Part III to figure the tax.
The following examples show how to figure the separate tax on Form 4972.
Robert C. Smith, who was born in 1935, retired from Crabtree Corporation in 2009. He withdrew the entire amount to his credit from the company's qualified pension plan. In December 2009, he received a total distribution of $175,000 (the $25,000 tax-free part of the distribution consisting of employee contributions plus the $150,000 taxable part of the distribution consisting of employer contributions and earnings on all contributions).
The payer gave Robert a Form 1099-R, which shows the capital gain part of the taxable distribution (the part attributable to participation before 1974) to be $10,000. Robert elects 20% capital gain treatment for this part. Filled-in copies of Robert's Form 1099-R and Form 4972 follow. He enters $10,000 on Form 4972, Part II, line 6 and $2,000 ($10,000 × 20%) on Part II, line 7.
The ordinary income part of the taxable distribution is $140,000 ($150,000 – $10,000). Robert elects to figure the tax on this part using the 10-year tax option. He enters $140,000 on Form 4972, Part III, line 8. Then he completes the rest of Form 4972 and includes the tax of $24,270 in the total on line 44 of his Form 1040.
Mary Brown, who was born in 1935, sold her business in 2009. She withdrew her entire interest in the qualified profit-sharing plan she had set up as the sole proprietor.
The cash part of the distribution, $160,000, is all ordinary income and is shown on her Form 1099-R below. She chooses to figure the tax on this amount using the 10-year tax option. Mary also received an annuity contract as part of the distribution from the plan. Box 8, Form 1099-R, shows that the current actuarial value of the annuity was $10,000. She enters these figures on Form 4972 (shown later).
After completing Form 4972, she includes the tax of $28,070 in the total on Form 1040, line 44.
If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can defer tax on the distribution by rolling it over to another qualified retirement plan or a traditional IRA. You do not include the amount rolled over in your income until you receive it in a distribution from the recipient plan or IRA without rolling over that distribution. (For information about rollovers from traditional IRAs, see chapter 1 of Publication 590.)
If you roll over the distribution to a traditional IRA, you cannot deduct the amount rolled over as an IRA contribution. When you later withdraw it from the IRA, you cannot use the optional methods discussed earlier under Lump-Sum Distributions to figure the tax.
Self-employed individuals are generally treated as employees for the rules on the tax treatment of distributions, including the rules for rollovers.
See Designated Roth accounts , later, for information on rollovers related to those accounts. Also, see Rollovers to Roth IRAs , later, for information on rollovers from a qualified retirement plan to a Roth IRA.
For this purpose, the following plans are qualified retirement plans.
An eligible rollover distribution is any distribution of all or any part of the balance to your credit in a qualified retirement plan except:
You can choose to have any part or all of an eligible rollover distribution paid directly to another qualified retirement plan that accepts rollover distributions or to a traditional or Roth IRA. There is an automatic rollover requirement for mandatory distributions. A mandatory distribution is a distribution made without your consent and before you reach age 62 or normal retirement age, whichever is later. The automatic rollover requirement applies if the distribution is more than $1,000 and is an eligible rollover distribution. You can choose to have the distribution paid directly to you or rolled over directly to your traditional or Roth IRA or another qualified retirement plan. If you do not make this choice, the plan administrator will automatically roll over the distribution into an IRA of a designated trustee or issuer.
If you choose the direct rollover option, or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. If any part of the eligible rollover distribution is paid to you, the payer must generally withhold 20% of it for income tax.
You receive an eligible rollover distribution of $10,000 from your employer's qualified employee plan. The payer withholds $2,000, so you actually receive $8,000. If you want to roll over the entire $10,000 to postpone including that amount in your income, you will have to get $2,000 from some other source to add to the $8,000 you actually received.
If you roll over only $8,000, you must include the $2,000 not rolled over in your income for the distribution year. Also, you may be subject to the 10% additional tax on the $2,000 if it was distributed to you before you reached age 59½.
You generally must complete the rollover of an eligible rollover distribution paid to you by the 60th day following the day on which you receive the distribution from your employer's plan. The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control.
In the previous example, you received the distribution on June 30, 2010. To postpone including it in your income, you must complete the rollover by August 29, 2010, the 60th day following June 30.
If an amount distributed to you becomes a frozen deposit in a financial institution during the 60-day period after you receive it, the rollover period is extended. An amount is a frozen deposit if you cannot withdraw it because of either:
The 60-day rollover period is extended by the period for which the amount is a frozen deposit and does not end earlier than 10 days after the amount is no longer a frozen deposit.
If you redeem retirement bonds purchased under a qualified bond purchase plan, you can roll over the proceeds that exceed your basis tax free into an IRA or qualified employer plan. Subsequent distributions of those proceeds, however, do not qualify for the 10-year tax option or capital gain treatment.
If an annuity contract was distributed to you by a qualified retirement plan, you can roll over an amount paid under the contract that is otherwise an eligible rollover distribution. For example, you can roll over a single sum payment you receive upon surrender of the contract to the extent it is taxable and is not a required minimum distribution.
To roll over an eligible rollover distribution of property, you must either roll over the actual property distributed or sell it and roll over the proceeds. You cannot keep the distributed property and roll over cash or other property. If you sell the distributed property and roll over all the proceeds, no gain or loss is recognized on the sale. The sale proceeds (including any portion representing an increase in value) are treated as part of the distribution and are not included in your gross income. If you roll over only part of the proceeds, you are taxed on the part you keep. You must allocate the proceeds you keep between the part representing ordinary income from the distribution (its value upon distribution) and the part representing gain or loss from the sale (its change in value from its distribution to its sale).
On September 4, 2009, Paul received an eligible rollover distribution from his employer's noncontributory qualified employee plan of $50,000 in nonemployer stock. On September 24, 2009, he sold the stock for $60,000. On October 3, 2009, he contributed $60,000 cash to a traditional IRA. Paul does not include either the $50,000 eligible rollover distribution or the $10,000 gain from the sale of the stock in his income. The entire $60,000 rolled over will be ordinary income when he withdraws it from his IRA.
The facts are the same as in Example 1, except that Paul sold the stock for $40,000 and contributed $40,000 to the IRA. Paul does not include the $50,000 eligible rollover distribution in his income and does not deduct the $10,000 loss from the sale of the stock. The $40,000 rolled over will be ordinary income when he withdraws it from his IRA.
The facts are the same as in Example 1, except that Paul rolled over only $45,000 of the $60,000 proceeds from the sale of the stock. The $15,000 proceeds he did not roll over includes part of the gain from the stock sale. Paul reports $2,500 ($10,000 ÷ $60,000 × $15,000) as capital gain and $12,500 ($50,000 ÷ $60,000 × $15,000) as ordinary income.
The facts are the same as in Example 2, except that Paul rolled over only $25,000 of the $40,000 proceeds from the sale of the stock. The $15,000 proceeds he did not roll over includes part of the loss from the stock sale. Paul reports $3,750 ($10,000 ÷ $40,000 × $15,000) capital loss and $18,750 ($50,000 ÷ $40,000 × $15,000) ordinary income.
If both cash and property were distributed and you did not roll over the entire distribution, you may designate what part of the rollover is allocable to the cash distribution and what part is allocable to the proceeds from the sale of the distributed property. If the distribution included an amount that is not taxable (other than the net unrealized appreciation in employer securities) as well as an eligible rollover distribution, you may also designate what part of the nontaxable amount is allocable to the cash distribution and what part is allocable to the property. Your designation must be made by the due date for filing your tax return, including extensions. You cannot change your designation after that date. If you do not make a designation on time, the rollover amount or the nontaxable amount must be allocated on a ratable basis.
The administrator of a qualified retirement plan must, within a reasonable period of time before making an eligible rollover distribution, provide you with a written explanation. It must tell you about all of the following.
The plan administrator must provide you with a written explanation no earlier than 90 days and no later than 30 days before the distribution is made. However, you can choose to have a distribution made less than 30 days after the explanation is provided as long as the following two requirements are met.
Contact the plan administrator if you have any questions regarding this information.
You receive an eligible rollover distribution that is not a qualified distribution from your designated Roth account. The distribution consists of $11,000 (investment) and $3,000 (income earned). Within 60 days of receipt, you roll over $7,000 into a Roth IRA. The $7,000 consists of $3,000 of income and $4,000 of investment. Since you rolled over the part of the distribution that could be included in gross income (income earned), none of the distribution is included in gross income.
You can roll over distributions directly from a qualified retirement plan (other than a designated Roth account) to a Roth IRA if, for the tax year of the distribution, both of the following requirements are met.
For tax years starting in 2010, the $100,000 modified AGI limit for rollovers to Roth IRAs is eliminated and married taxpayers filing a separate return can now roll over amounts to a Roth IRA. For any rollovers in 2010, any amounts that are required to be included in income are included in income in equal amounts in 2011 and 2012. If you elect otherwise, you can choose to include the entire amount in income in 2010.
Table 1 may help you decide which distribution option to choose. Carefully compare the effects of each option.
| Affected item | Result of a payment to you | Result of a direct rollover |
| Withholding | The payer must withhold 20% of the taxable part. | There is no withholding. |
| Additional tax | If you are under age 59½, a 10% additional tax may apply to the taxable part (including an amount equal to the tax withheld) that is not rolled over. | There is no 10% additional tax. See Tax on Early Distributions , later. |
| When to report as income | Any taxable part (including the taxable part of any amount withheld) not rolled over is income to you in the year paid. | Any taxable part is not income to you until later distributed to you from the new plan or IRA. However, see Rollovers to Roth IRAs , earlier, for an exception. |
If you are a qualified taxpayer and you received qualified settlement income in connection with the Exxon Valdez litigation, you can contribute all or part of it to an eligible retirement plan. This includes a qualified retirement plan. The amount contributed cannot exceed $100,000 (reduced by the amount of qualified settlement income contributed to an eligible retirement plan in prior tax years) or the amount of qualified settlement income received during the tax year. Contributions for the year can be made until the due date for filing your tax return, not including extensions. Qualified settlement income that you contribute to a qualified retirement plan will be treated as having been rolled over in a direct trustee-to-trustee transfer within 60 days of the distribution. The amount contributed is not included in your taxable income and it is not considered to be investment in the contract. You are a qualified taxpayer if you are:
Qualified settlement income that is contributed to a Roth IRA or a designated Roth account will be:
To discourage the use of pension funds for purposes other than normal retirement, the law imposes additional taxes on early distributions of those funds and on failures to withdraw the funds timely. Ordinarily, you will not be subject to these taxes if you roll over all early distributions you receive, as explained earlier, and begin drawing out the funds at a normal retirement age, in prorated amounts over your life expectancy. These special additional taxes are the taxes on:
These taxes are discussed in the following sections.
If you must pay either of these taxes, report them on Form 5329. However, you do not have to file Form 5329 if you owe only the tax on early distributions and your Form 1099-R correctly shows a “1” in box 7. Instead, enter 10% of the taxable part of the distribution on Form 1040, line 58 and enter “No” under the heading “Other Taxes” to the left of line 58. If you file Form 1040NR, enter 10% of the taxable part of the distribution on line 54 and enter “No” under the heading “Other Taxes” to the left of line 54.
Even if you do not owe any of these taxes, you may have to complete Form 5329 and attach it to your Form 1040 or Form 1040NR. This applies if you meet an exception to the tax on early distributions but box 7 of your Form 1099-R does not indicate an exception.
Most distributions (both periodic and nonperiodic) from qualified retirement plans and nonqualified annuity contracts made to you before you reach age 59½ are subject to an additional tax of 10%. This tax applies to the part of the distribution that you must include in gross income. It does not apply to any part of a distribution that is tax free, such as amounts that represent a return of your cost or that were rolled over to another retirement plan. It also does not apply to corrective distributions of excess deferrals, excess contributions, or excess aggregate contributions (discussed earlier under Taxation of Nonperiodic Payments).
For this purpose, a qualified retirement plan is:
If an early withdrawal from a deferred annuity is otherwise subject to the 10% additional tax, a 5% rate may apply instead. A 5% rate applies to distributions under a written election providing a specific schedule for the distribution of your interest in the contract if, as of March 1, 1986, you had begun receiving payments under the election. On line 4 of Form 5329, multiply the line 3 amount by 5% instead of 10%. Attach an explanation to your return.
The tax does not apply to distributions that are:
The tax does not apply to distributions that are:
If you are a qualified public safety employee, distributions made from a governmental defined benefit pension plan are not subject to the additional tax on early distributions. You are a qualified public safety employee if you provided police protection, firefighting services, or emergency medical services for a state or municipality, and you separated from service in or after the year you attained age 50.
The tax does not apply to distributions that are:
Payments are substantially equal periodic payments if they are made in accordance with one of the following methods.
To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date (defined later). The payments each year cannot be less than the minimum required distribution.
If the actual distributions to you in any year are less than the minimum required distribution (RMD) for that year, you are subject to an additional tax. The tax equals 50% of the part of the required minimum distribution that was not distributed.
For this purpose, a qualified retirement plan includes:
You might not receive the minimum distribution because assets are invested in a contract issued by an insurance company in state insurer delinquency proceedings. If your payments are reduced below the minimum because of these proceedings, you should contact your plan administrator. Under certain conditions, you will not have to pay the 50% excise tax.
Unless the rule for 5% owners applies, you generally must begin to receive distributions from your qualified retirement plan by April 1 of the year that follows the later of:
However, your plan may require you to begin to receive distributions by April 1 of the year that follows the year in which you reach age 70½, even if you have not retired. If you reach age 70½ in 2009, you are not required to receive your first distribution by April 1, 2010. Your first required distribution however must be made for 2010 by December 31, 2010.
If you are a 5% owner, you must begin to receive distributions from the plan by April 1 of the year that follows the calendar year in which you reach age 70½. This rule does not apply if your retirement plan is a government or church plan. You are a 5% owner if, for the plan year ending in the calendar year in which you reach age 70½, you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the outstanding stock (or more than 5% of the total voting power of all stock) of the employer, or more than 5% of the capital or profits interest in the employer.
You reach age 70½ on the date that is 6 calendar months after the date of your 70th birthday. For example, if your 70th birthday was on June 30, 2009, you reached age 70½ on December 30, 2009. If your 70th birthday was on July 1, 2009, you reached age 70½ on January 1, 2010.
By the required beginning date, you must either:
You retired under a qualified employee plan in 2008. You reached age 70½ on August 20, 2009. For 2009 (your starting year), no RMD would be required. Your next RMD for 2010 should be made by December 31, 2010.
You retired under a qualified plan in 2009. You reached age 70½ on February 1, 2010. For 2010 (your starting year), you must receive a minimum amount from your retirement plan by April 1, 2011. You must receive the minimum required distribution for 2011 by December 31, 2011.
If the employee was receiving periodic distributions before his or her death, any payments not made as of the time of death must be distributed at least as rapidly as under the distribution method being used at the date of death. If the employee dies before the required beginning date, the entire account must be distributed under one of the following rules.
The terms of the plan may determine which of these two rules applies. If the plan permits the employee or the beneficiary to choose the rule that applies, this choice must be made by the earliest date a distribution would be required under either of the rules. Generally, this date is December 31 of the year following the year of the employee's death. If the employee or the beneficiary did not choose either rule and the plan does not specify the rule that applies, distribution must be made under Rule 2 if the employee has a designated beneficiary or under Rule 1 if the employee does not have a designated beneficiary. Distributions under Rule 2 generally must begin by December 31 of the year following the year of the employee's death. However, if the surviving spouse is the beneficiary, distributions need not begin until December 31 of the year the employee would have reached age 70½, if later. If the surviving spouse is the designated beneficiary and distributions are to be made under Rule 2, a special rule applies if the spouse dies after the employee but before distributions are required to begin. In this case, distributions may be made to the spouse's beneficiary under either Rule 1 or Rule 2, as though the beneficiary were the employee's beneficiary and the employee died on the spouse's date of death. However, if the surviving spouse remarries after the employee's death and the new spouse is designated as the spouse's beneficiary, this special rule applicable to surviving spouses does not apply to the new spouse.
Special rules may apply if you receive distributions from your retirement plan in the form of an annuity. Your plan administrator should be able to give you information about these rules.
Your plan administrator should be able to give you information about how the amount of your required distribution was figured. If there is an account balance to be distributed from your plan (not as an annuity), your plan administrator must figure the minimum amount that must be distributed from the plan each year.
The minimum amount that must be distributed for any year may be made in a series of installments (for example, monthly or quarterly) as long as the total payments for the year made by the date required are not less than the minimum amount required for the year.
Your plan can distribute more in any year than the minimum amount required for that year but, if it does, you will not receive credit for the additional amount in determining the minimum amount required for future years. However, any amount distributed in your starting year will be credited toward the amount required to be distributed by April 1 of the following year.
Generally, the required minimum distribution must be figured separately for each account. Each qualified employee retirement plan and qualified annuity plan must be considered individually in satisfying its distribution requirements. However, if you have more than one tax-sheltered annuity account, you can total the required distributions and then satisfy the requirement by taking distributions from any one (or more) of the tax-sheltered annuities.
Generally, a survivor or beneficiary reports pension or annuity income in the same way the plan participant would have reported it. However, some special rules apply, and they are covered elsewhere in this publication as well as in this section.
If you receive guaranteed payments as the decedent's beneficiary under a life annuity contract, do not include any amount in your gross income until your distributions plus the tax-free distributions received by the life annuitant equal the cost of the contract. All later distributions are fully taxable. This rule does not apply if it is possible for you to collect more than the guaranteed amount. For example, it does not apply to payments under a joint and survivor annuity.
Special rules regarding withdrawals and repayments from certain retirement plans provided relief to taxpayers who suffered an economic loss as a result of Hurricane Katrina, Rita, or Wilma and applied to distributions received before 2007 as qualified hurricane distributions. Although, qualified hurricane distributions had to be included in income before 2009, certain 2006 distributions could be repaid through 2009.
If you received a qualified hurricane distribution, the taxable amount is figured in the same manner as other distributions (see the sections on Cost , Taxation of Periodic Payments , and Taxation of Nonperiodic Payments , earlier). However, the distribution was included in income ratably over 3 years beginning with the year you received the distribution, unless you elected to report the entire amount in the year of distribution. You can repay the distribution and not be taxed on the distribution.
Form 8915, Qualified Hurricane Retirement Plan Distributions and Repayments, is used to report repayments of qualified hurricane distributions.
For information on other tax provisions related to these hurricanes, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma.
Most 2006 qualified hurricane distributions are eligible for repayment to an eligible retirement plan (defined later). Payments received as a beneficiary (other than a surviving spouse), periodic payments (other than from IRAs), and required minimum distributions are not eligible for repayment. Periodic payments, for this purpose, are payments that are for (a) a period of 10 years or more, (b) your life or life expectancy, or (c) the joint lives or joint life expectancies of you and your beneficiary. For distributions eligible for repayment, you have 3 years from the day after the date you received the distribution to repay all or part to any plan, annuity, or IRA to which a rollover can be made. Within the time allowed, you may make as many repayments as you choose. The total amount repaid cannot be more than the amount of your qualified hurricane distributions. Amounts repaid are treated as a qualified rollover and are not included in income. The way you report repayments depends on whether you reported the distributions under the 3-year ratable method, or you elected to report the distributions in the year of distribution.
Maria received a $15,000 qualified hurricane distribution on November 10, 2006, from a section 457(b) plan. She elected out of the 3-year ratable method for reporting distributions on Form 8915 and included the entire $15,000 in gross income for 2006. On October 31, 2009, she repays $15,000 to the plan. She must file an amended return for 2006 to reduce her gross income by the $15,000 repayment amount and a revised Form 8915 to report the repayment.
If you reported the distribution in income ratably over the 3-year period and you repay any portion of the distribution to an eligible retirement plan, the repayment may be carried back to reduce the amount included in income in previous years. After 2008, qualified hurricane distributions are no longer required to be included in income.
John received a $90,000 qualified hurricane distribution from his pension plan on November 15, 2006. He did not elect to include the entire distribution in his 2006 income. He included $30,000 of the distribution in income on his 2006, 2007, and 2008 returns. On November 8, 2009, John repays $45,000 to an eligible retirement plan. He makes no other repayments during the allowable 3-year period. John may carry back the repayment and reduce the amount previously included in income by amending his 2006, 2007, or 2008 return.
An eligible retirement plan could have been any of the following.
If you make a repayment in 2009, the repayment may reduce the amount of your qualified hurricane distributions that were previously included in income. You will need to file an amended tax return to refigure your taxable income.
Include the repayment on your 2009 Form 8915. You can file an amended return for 2006, 2007, or 2008 if either of the following applies.
File Form 1040X to amend a return you have already filed. Generally, Form 1040X must be filed within 3 years after the date the original return was filed, or within 2 years after the date the tax was paid, whichever is later.
Special rules provided for tax-favored withdrawals, repayments, and loans from certain retirement plans for individuals who suffered economic losses as a result of the May 4, 2007, Kansas storms and tornadoes and applied to distributions received before 2009 as qualified recovery assistance distributions (defined later). While qualified recovery assistance distributions cannot be made after 2008, the special rules explain how much of a qualified distribution has to be included in income after 2008, and when an amended return must be filed to reduce the amount of a qualified distribution previously included in income as a result of a repayment after 2008.
Except as provided below, a qualified recovery assistance distribution is any distribution you received and designated as such from an eligible retirement plan (see Eligible retirement plan on this page) if all of the following apply.
If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified recovery assistance distribution, regardless of whether the distribution was made on account of the storms and tornadoes. Qualified recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss.
The total of your qualified recovery assistance distributions from all plans is limited to $100,000. If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose.
A reduction or offset after May 3, 2007, of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified recovery assistance distribution.
Qualified recovery assistance distributions are included in income in equal amounts over three years. However, if you elect, you can include the entire distribution in your income in the year it was received.
Qualified recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). However, any distributions you receive in excess of the $100,000 qualified recovery assistance distribution limit may be subject to the additional tax on early distributions.
If you choose, you generally can repay any portion of a qualified recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan (defined earlier under Hurricane-Related Relief). Also, you can repay a qualified recovery assistance distribution made on account of a hardship from a retirement plan. However, see Exceptions below for qualified recovery assistance distributions you cannot repay.
You have three years from the day after the date you received the distribution to make a repayment. Amounts that are repaid are treated as a qualified rollover and are not included in income. Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. See Form 8915 for more information on how to report repayments.
You cannot repay the following types of distributions.
If you make a repayment in 2009, the repayment may reduce the amount of your qualified recovery assistance distributions that were previously included in income. You may need to file an amended return to refigure your taxable income if:
File Form 1040X to amend a return you have already filed. Generally, Form 1040X must be filed within 3 years after the date the original return was filed, or within 2 years after the date the tax was paid, whichever is later.
See Tables 1 and 2 in Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas, for a list of the Midwestern disaster areas and the applicable disaster dates.
Special rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of the Midwestern severe storms, tornadoes, or flooding.
If you receive a qualified disaster recovery assistance distribution, it is taxable but is not subject to the 10% additional tax on early distributions (see the sections on Cost , Taxation of Periodic Payments , and Taxation of Nonperiodic Payments , earlier). However, the distribution is included in income ratably over 3 years unless you elect to report the entire amount in the year of distribution. You can repay the distribution and not be taxed on the distribution. See Qualified disaster recovery assistance distribution, later.
Form 8930, Qualified Disaster Recovery Assistance Retirement Plan Distributions and Repayments, is used to report qualified disaster recovery assistance distributions and repayments.
For information on other tax provisions related to these storms, tornadoes, or flooding, see Publication 4492-B.
A qualified disaster recovery assistance distribution is any distribution you received from an eligible retirement plan (see Eligible retirement plan earlier) if all of the following apply.
If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified disaster recovery assistance distribution, regardless of whether the distribution was made on account of the severe storms, tornadoes, or flooding. Qualified disaster recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss.
A reduction or offset (on or after the applicable disaster date) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified disaster recovery assistance distribution.
The total of your qualified disaster recovery assistance distributions from all plans is limited to $100,000. If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose.
In August 2008, you received a distribution of $50,000. In 2009, you receive a distribution of $125,000. Both distributions meet the requirements for a qualified disaster recovery assistance distribution. If you decide to treat the entire $50,000 received in 2008 as a qualified disaster recovery assistance distribution, only $50,000 of the 2009 distribution could be treated as a qualified disaster recovery assistance distribution.
Qualified disaster recovery assistance distributions are included in income in equal amounts over three years. However, if you elect, you can include the entire distribution in your income in the year it was received.
Qualified disaster recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). However, any distributions you receive in excess of the $100,000 qualified disaster recovery assistance distribution limit may be subject to the additional tax on early distributions.
For more information, see Form 8930.
If you choose, you generally can repay any portion of a qualified disaster recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. Also, you can repay a qualified disaster recovery assistance distribution made on account of a hardship from a retirement plan. However, see Exceptions later for qualified disaster recovery assistance distributions you cannot repay.
You have three years from the day after the date you received the distribution to make a repayment. Amounts that are repaid are treated as a qualified rollover and are not included in income. Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. See Form 8930 for more information on how to report repayments.
If you are reporting the distribution in income over the 3-year period and you repay any portion of the distribution to an eligible retirement plan before filing your 2009 tax return by the due date (including extensions) for that return, the repayment will reduce the portion of the distribution that is included in income in 2009. If you repay a portion after the due date (including extensions) for filing your 2009 return, the repayment will reduce the portion of your distribution that is includible in income for the year it was repaid, the excess may be carried forward or back to reduce the amount included in income for the year to which it was carried.
Brian received a $90,000 qualified disaster recovery assistance distribution from his pension plan on October 15, 2009. He does not elect to include the entire distribution in his 2009 income. Without any repayments, he would include $30,000 of the distribution in income on each of his 2009, 2010, and 2011 returns. On October 30, 2010, Brian repays $45,000 to an eligible retirement plan. He makes no other repayments during the 3-year period. Brian may report the distribution and repayment in either of the following ways.
You cannot repay the following types of distributions.
If after filing your original return, you make a repayment, the repayment may reduce the amount of your qualified disaster recovery assistance distributions that were previously included in income. Depending on when a repayment is made, you may need to file an amended tax return to refigure your taxable income.
If you make a repayment by the due date of your original return (including extensions), include the repayment on your amended return.
If you make a repayment after the due date of your original return (including extensions), include it on your amended return only if either of the following apply.
The following benefits are available to qualified individuals.
You are a qualified individual if your main home was located in a Midwestern disaster area on the applicable disaster date and you had an economic loss because of the severe storms, tornadoes, or flooding. Examples of an economic loss include, but are not limited to:
The $50,000 limit for distributions treated as plan loans is increased to $100,000. In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. If your main home was located in a Midwestern disaster area, the higher limits applied only to loans received during the period beginning on October 3, 2008, and before January 1, 2010.
Payments on plan loans outstanding on or after the applicable disaster date, may be suspended for one year by the plan administrator. To qualify for the suspension, the due date for any loan payment must have been during the period beginning on the applicable disaster date and ending on December 31, 2009.
| 1. | Enter the total pension or annuity payments received this year. Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a | 1. | ||||
| 2. | Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion.* See Cost (Investment in the Contract) earlier | 2. | ||||
| Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Otherwise, go to line 3. | ||||||
| 3. | Enter the appropriate number from Table 1 below. 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. | ||||
| 4. | Divide line 2 by the number on line 3 | 4. | ||||
| 5. | Multiply line 4 by the number of months for which this year's payments were made. If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Otherwise, go to line 6 | 5. | ||||
| 6. | Enter any amounts previously recovered tax free in years after 1986. This is the amount shown on line 10 of your worksheet for last year | 6. | ||||
| 7. | Subtract line 6 from line 2 | 7. | ||||
| 8. | Enter the smaller of line 5 or line 7 | 8. | ||||
| 9. | Taxable amount for year. Subtract line 8 from line 1. Enter the result, but not less than zero. Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. 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. | ||||
| 10. | Was your annuity starting date before 1987? □ Yes. STOP. Do not complete the rest of this worksheet. □ No. Add lines 6 and 8. This is the amount you have recovered tax free through 2009. You will need this number if you need to fill out this worksheet next year | 10. | ||||
| 11. | Balance of cost to be recovered. Subtract line 10 from line 2. If zero, you will not have to complete this worksheet next year. The payments you receive next year will generally be fully taxable | 11. | ||||
| * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. | ||||||
| Table 1 for Line 3 Above | ||||||
| IF the age at annuity starting date was | ||||||
| AND your annuity starting date was— | ||||||
| BEFORE November 19, 1996, enter on line 3 | AFTER November 18, 1996, enter on line 3 | |||||
| 55 or under | 300 | 360 | ||||
| 56-60 | 260 | 310 | ||||
| 61-65 | 240 | 260 | ||||
| 66-70 | 170 | 210 | ||||
| 71 or over | 120 | 160 | ||||
| Table 2 for Line 3 Above | ||||||
| IF the combined ages at annuity starting date were | THEN enter on line 3 | |||||
| 110 or under | 410 | |||||
| 111-120 | 360 | |||||
| 121-130 | 310 | |||||
| 131-140 | 260 | |||||
| 141 or over | 210 |
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