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1040 ez Publication 575 - Main Content Table of Contents General InformationPension. 1040 ez Annuity. 1040 ez Qualified employee plan. 1040 ez Qualified employee annuity. 1040 ez Designated Roth account. 1040 ez Tax-sheltered annuity plan. 1040 ez Fixed-period annuities. 1040 ez Annuities for a single life. 1040 ez Joint and survivor annuities. 1040 ez Variable annuities. 1040 ez Disability pensions. 1040 ez Variable Annuities Section 457 Deferred Compensation Plans Disability Pensions Insurance Premiums for Retired Public Safety Officers Railroad Retirement Benefits Withholding Tax and Estimated Tax Cost (Investment in the Contract)Foreign employment contributions while a nonresident alien. 1040 ez Taxation of Periodic PaymentsPeriod of participation. 1040 ez Fully Taxable Payments Partly Taxable Payments Taxation of Nonperiodic PaymentsFiguring the Taxable Amount Loans Treated as Distributions Transfers of Annuity Contracts Lump-Sum Distributions RolloversExceptions. 1040 ez No tax withheld. 1040 ez Partial rollovers. 1040 ez Frozen deposits. 1040 ez Reasonable period of time. 1040 ez 20% Mandatory withholding. 1040 ez How to report. 1040 ez How to report. 1040 ez Special rule for Roth IRAs and designated Roth accounts. 1040 ez Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. 1040 ez How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. 1040 ez   Some of the terms used in this publication are defined in the following paragraphs. 1040 ez Pension. 1040 ez   A pension is generally a series of definitely determinable payments made to you after you retire from work. 1040 ez Pension payments are made regularly and are based on such factors as years of service and prior compensation. 1040 ez Annuity. 1040 ez   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. 1040 ez They can be either fixed (under which you receive a definite amount) or variable (not fixed). 1040 ez You can buy the contract alone or with the help of your employer. 1040 ez Qualified employee plan. 1040 ez   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. 1040 ez 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). 1040 ez To determine whether your plan is a qualified plan, check with your employer or the plan administrator. 1040 ez Qualified employee annuity. 1040 ez   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. 1040 ez Designated Roth account. 1040 ez   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. 1040 ez Elective deferrals that are designated as Roth contributions are included in your income. 1040 ez However, qualified distributions (explained later) are not included in your income. 1040 ez You should check with your plan administrator to determine if your plan will accept designated Roth contributions. 1040 ez Tax-sheltered annuity plan. 1040 ez   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. 1040 ez Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. 1040 ez Types of pensions and annuities. 1040 ez   Pensions and annuities include the following types. 1040 ez Fixed-period annuities. 1040 ez   You receive definite amounts at regular intervals for a specified length of time. 1040 ez Annuities for a single life. 1040 ez   You receive definite amounts at regular intervals for life. 1040 ez The payments end at death. 1040 ez Joint and survivor annuities. 1040 ez   The first annuitant receives a definite amount at regular intervals for life. 1040 ez After he or she dies, a second annuitant receives a definite amount at regular intervals for life. 1040 ez The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. 1040 ez Variable annuities. 1040 ez   You receive payments that may vary in amount for a specified length of time or for life. 1040 ez 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. 1040 ez Disability pensions. 1040 ez   You receive disability payments because you retired on disability and have not reached minimum retirement age. 1040 ez More than one program. 1040 ez   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. 1040 ez 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. 1040 ez Also, you may be considered to have received more than one pension or annuity. 1040 ez Your former employer or the plan administrator should be able to tell you if you have more than one contract. 1040 ez Example. 1040 ez Your employer set up a noncontributory profit-sharing plan for its employees. 1040 ez The plan provides that the amount held in the account of each participant will be paid when that participant retires. 1040 ez 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. 1040 ez 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. 1040 ez Under the pension plan, however, a formula determines the amount of the pension benefits. 1040 ez The amount of contributions is the amount necessary to provide that pension. 1040 ez Each plan is a separate program and a separate contract. 1040 ez 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. 1040 ez Distributions from a designated Roth account are treated separately from other distributions from the plan. 1040 ez Qualified domestic relations order (QDRO). 1040 ez   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. 1040 ez 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. 1040 ez A QDRO may not award an amount or form of benefit that is not available under the plan. 1040 ez   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. 1040 ez 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. 1040 ez The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. 1040 ez The denominator is the present value of all benefits payable to the participant. 1040 ez   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. 1040 ez Variable Annuities The tax rules in this publication apply both to annuities that provide fixed payments and to annuities that provide payments that vary in amount based on investment results or other factors. 1040 ez 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. 1040 ez 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. 1040 ez The earnings are not taxed until distributed either in a withdrawal or in annuity payments. 1040 ez The taxable part of a distribution is treated as ordinary income. 1040 ez Net investment income tax. 1040 ez   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). 1040 ez For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. 1040 ez 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. 1040 ez Withdrawals. 1040 ez   If you withdraw funds before your annuity starting date and your annuity is under a qualified retirement plan, a ratable part of the amount withdrawn is tax free. 1040 ez The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. 1040 ez   If your annuity is under a nonqualified plan (including a contract you bought directly from the issuer), the amount withdrawn is allocated first to earnings (the taxable part) and then to your cost (the tax-free part). 1040 ez However, if you bought your annuity contract before August 14, 1982, a different allocation applies to the investment before that date and the earnings on that investment. 1040 ez To the extent the amount withdrawn does not exceed that investment and earnings, it is allocated first to your cost (the tax-free part) and then to earnings (the taxable part). 1040 ez   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. 1040 ez   The amount you receive in a full surrender of your annuity contract at any time is tax free to the extent of any cost that you have not previously recovered tax free. 1040 ez The rest is taxable. 1040 ez   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. 1040 ez If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. 1040 ez Annuity payments. 1040 ez   If you receive annuity payments under a variable annuity plan or contract, you recover your cost tax free under either the Simplified Method or the General Rule, as explained under Taxation of Periodic Payments , later. 1040 ez For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. 1040 ez For a variable annuity paid under a nonqualified plan (including a contract you bought directly from the issuer), you must use a special computation under the General Rule. 1040 ez For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. 1040 ez Death benefits. 1040 ez    If you receive a single-sum distribution from a variable annuity contract because of the death of the owner or annuitant, the distribution is generally taxable only to the extent it is more than the unrecovered cost of the contract. 1040 ez If you choose to receive an annuity, the payments are subject to tax as described above. 1040 ez If the contract provides a joint and survivor annuity and the primary annuitant had received annuity payments before death, you figure the tax-free part of annuity payments you receive as the survivor in the same way the primary annuitant did. 1040 ez See Survivors and Beneficiaries , later. 1040 ez Section 457 Deferred Compensation Plans If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. 1040 ez 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. 1040 ez You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. 1040 ez You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. 1040 ez Your 457(b) plan may have a designated Roth account option. 1040 ez If so, you may be able to roll over amounts to the designated Roth account or make contributions. 1040 ez Elective deferrals to a designated Roth account are included in your income. 1040 ez Qualified distributions (explained later) are not included in your income. 1040 ez See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. 1040 ez This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. 1040 ez For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. 1040 ez Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. 1040 ez Plans that are not eligible section 457 plans include the following: Bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plans. 1040 ez Nonelective deferred compensation plans for nonemployees (independent contractors). 1040 ez Deferred compensation plans maintained by churches. 1040 ez Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. 1040 ez An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. 1040 ez Disability Pensions If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. 1040 ez 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. 1040 ez Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. 1040 ez You may be entitled to a tax credit if you were permanently and totally disabled when you retired. 1040 ez For information on this credit, see Publication 524. 1040 ez Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. 1040 ez Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. 1040 ez 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. 1040 ez For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. 1040 ez Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. 1040 ez The premiums can be for coverage for you, your spouse, or dependents. 1040 ez The distribution must be made directly from the plan to the insurance provider. 1040 ez You can exclude from income the smaller of the amount of the insurance premiums or $3,000. 1040 ez You can only make this election for amounts that would otherwise be included in your income. 1040 ez The amount excluded from your income cannot be used to claim a medical expense deduction. 1040 ez An eligible retirement plan is a governmental plan that is: a qualified trust, a section 403(a) plan, a section 403(b) annuity, or a section 457(b) plan. 1040 ez If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. 1040 ez The amount shown in box 2a of Form 1099-R does not reflect this exclusion. 1040 ez Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. 1040 ez Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. 1040 ez Enter “PSO” next to the appropriate line on which you report the taxable amount. 1040 ez 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. 1040 ez Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. 1040 ez These categories are treated differently for income tax purposes. 1040 ez 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. 1040 ez 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. 1040 ez If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2013, you will receive Form RRB-1099, Payments by the Railroad Retirement Board (or Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, if you are a nonresident alien) from the U. 1040 ez S. 1040 ez Railroad Retirement Board (RRB). 1040 ez 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. 1040 ez The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). 1040 ez It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. 1040 ez Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. 1040 ez 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. 1040 ez (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. 1040 ez ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. 1040 ez See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. 1040 ez Form RRB-1099-R is used for U. 1040 ez S. 1040 ez citizens, resident aliens, and nonresident aliens. 1040 ez Nonresident aliens. 1040 ez   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. 1040 ez Nonresident aliens are subject to mandatory U. 1040 ez S. 1040 ez tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. 1040 ez A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. 1040 ez See Tax withholding next for more information. 1040 ez   If you are a nonresident alien and your tax withholding rate changed or your country of legal residence changed during the year, you may receive more than one Form RRB-1042S or Form RRB-1099-R. 1040 ez To determine your total benefits paid or repaid and total tax withheld for the year, you should add the amounts shown on all forms you received for that year. 1040 ez For information on filing requirements for aliens, see Publication 519, U. 1040 ez S. 1040 ez Tax Guide for Aliens. 1040 ez For information on tax treaties between the United States and other countries that may reduce or eliminate U. 1040 ez S. 1040 ez tax on your benefits, see Publication 901, U. 1040 ez S. 1040 ez Tax Treaties. 1040 ez Tax withholding. 1040 ez   To request or change your income tax withholding from SSEB payments, U. 1040 ez S. 1040 ez citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. 1040 ez To elect, revoke, or change your income tax withholding from NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments. 1040 ez If you are a nonresident alien or a U. 1040 ez S. 1040 ez citizen living abroad, you should provide Form RRB-1001, Nonresident Questionnaire, to the RRB to furnish citizenship and residency information and to claim any treaty exemption from U. 1040 ez S. 1040 ez tax withholding. 1040 ez Nonresident U. 1040 ez S. 1040 ez citizens cannot elect to be exempt from withholding on payments delivered outside of the U. 1040 ez S. 1040 ez Help from the RRB. 1040 ez   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. 1040 ez S. 1040 ez consulate/Embassy if you reside outside the United States. 1040 ez You can visit the RRB on the Internet at www. 1040 ez rrb. 1040 ez gov. 1040 ez Form RRB-1099-R. 1040 ez   The following discussion explains the items shown on Form RRB-1099-R. 1040 ez The amounts shown on this form are before any deduction for: Federal income tax withholding, Medicare premiums, Legal process garnishment payments, Recovery of a prior year overpayment of an NSSEB, tier 2 benefit, VDB, or supplemental annuity benefit, or Recovery of Railroad Unemployment Insurance Act benefits received while awaiting payment of your railroad retirement annuity. 1040 ez   The amounts shown on this form are after any offset for: Social Security benefits, Age reduction, Public Service pensions or public disability benefits, Dual railroad retirement entitlement under another RRB claim number, Work deductions, Legal process partition deductions, Actuarial adjustment, Annuity waiver, or Recovery of a current-year overpayment of NSSEB, tier 2, VDB, or supplemental annuity benefits. 1040 ez   The amounts shown on Form RRB-1099-R do not reflect any special rules, such as capital gain treatment or the special 10-year tax option for lump-sum payments, or tax-free rollovers. 1040 ez To determine if any of these rules apply to your benefits, see the discussions about them later. 1040 ez   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. 1040 ez Use distribution code “7” if you are asked for a distribution code. 1040 ez Distribution codes are not shown on Form RRB-1099-R. 1040 ez   There are three copies of this form. 1040 ez Copy B is to be included with your income tax return if federal income tax is withheld. 1040 ez Copy C is for your own records. 1040 ez Copy 2 is filed with your state, city, or local income tax return, when required. 1040 ez See the illustrated Copy B (Form RRB-1099-R) above. 1040 ez       Each beneficiary will receive his or her own Form RRB-1099-R. 1040 ez If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. 1040 ez So that you get your form timely, make sure the RRB always has your current mailing address. 1040 ez Please click here for the text description of the image. 1040 ez Form RRB-1099-R Box 1—Claim Number and Payee Code. 1040 ez   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. 1040 ez This is the number under which the RRB paid your benefits. 1040 ez Your payee code follows your claim number and is the last number in this box. 1040 ez It is used by the RRB to identify you under your claim number. 1040 ez In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. 1040 ez Box 2—Recipient's Identification Number. 1040 ez   This is the recipient's U. 1040 ez S. 1040 ez taxpayer identification number. 1040 ez It is the social security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN), if known, for the person or estate listed as the recipient. 1040 ez If you are a resident or nonresident alien who must furnish a taxpayer identification number to the IRS and are not eligible to obtain an SSN, use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN. 1040 ez The Instructions for Form W-7 explain how and when to apply. 1040 ez Box 3—Employee Contributions. 1040 ez   This is the amount of taxes withheld from the railroad employee's earnings that exceeds the amount of taxes that would have been withheld had the earnings been covered under the social security system. 1040 ez This amount is the employee's cost that you use to figure the tax-free part of the NSSEB and tier 2 benefit you received (the amount shown in box 4). 1040 ez (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. 1040 ez ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. 1040 ez It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. 1040 ez If this amount has changed, the change is retroactive. 1040 ez You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. 1040 ez If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. 1040 ez    If you had a previous annuity entitlement that ended and you are figuring the tax-free part of your NSSEB/tier 2 benefit for your current annuity entitlement, you should contact the RRB for confirmation of your correct employee contribution amount. 1040 ez Box 4—Contributory Amount Paid. 1040 ez   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. 1040 ez (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. 1040 ez ) This amount is the total contributory pension paid in 2013. 1040 ez It may be partly taxable and partly tax free or fully taxable. 1040 ez 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. 1040 ez Box 5—Vested Dual Benefit. 1040 ez   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. 1040 ez It is fully taxable. 1040 ez VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. 1040 ez Note. 1040 ez The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. 1040 ez Box 6—Supplemental Annuity. 1040 ez   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. 1040 ez It is fully taxable. 1040 ez Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. 1040 ez Box 7—Total Gross Paid. 1040 ez   This is the sum of boxes 4, 5, and 6. 1040 ez The amount represents the total pension paid in 2013. 1040 ez Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. 1040 ez Box 8—Repayments. 1040 ez   This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2013 for years before 2013 or for unknown years. 1040 ez The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. 1040 ez It only includes repayments of benefits that were taxable to you. 1040 ez This means it only includes repayments in 2013 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. 1040 ez If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. 1040 ez For more information about repayments, see Repayment of benefits received in an earlier year , later. 1040 ez    You may have repaid an overpayment of benefits by returning a payment, by making a payment, or by having an amount withheld from your railroad retirement annuity payment. 1040 ez Box 9—Federal Income Tax Withheld. 1040 ez   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. 1040 ez Include this on your income tax return as tax withheld. 1040 ez If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2013, you will receive more than one Form RRB-1099-R for 2013. 1040 ez Determine the total amount of U. 1040 ez S. 1040 ez federal income tax withheld from your 2013 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2013 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive. 1040 ez Box 10—Rate of Tax. 1040 ez   If you are taxed as a U. 1040 ez S. 1040 ez citizen or resident alien, this box does not apply to you. 1040 ez If you are a nonresident alien, an entry in this box indicates the rate at which tax was withheld on the NSSEB, tier 2, VDB, and supplemental annuity payments that were paid to you in 2013. 1040 ez If you are a nonresident alien whose tax was withheld at more than one rate during 2013, you will receive a separate Form RRB-1099-R for each rate change during 2013. 1040 ez Box 11—Country. 1040 ez   If you are taxed as a U. 1040 ez S. 1040 ez citizen or resident alien, this box does not apply to you. 1040 ez If you are a nonresident alien, an entry in this box indicates the country of which you were a resident for tax purposes at the time you received railroad retirement payments in 2013. 1040 ez If you are a nonresident alien who was a resident of more than one country during 2013, you will receive a separate Form RRB-1099-R for each country of residence during 2013. 1040 ez Box 12—Medicare Premium Total. 1040 ez   This is for information purposes only. 1040 ez The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. 1040 ez Medicare premium refunds are not included in the Medicare total. 1040 ez The Medicare total is normally shown on Form RRB-1099 (if you are a citizen or resident alien of the United States) or Form RRB-1042S (if you are a nonresident alien). 1040 ez However, if Form RRB-1099 or Form RRB-1042S is not required for 2013, then this total will be shown on Form RRB-1099-R. 1040 ez If your Medicare premiums were deducted from your social security benefits, paid by a third party, refunded to you, and/or you paid the premiums by direct billing, your Medicare total will not be shown in this box. 1040 ez Repayment of benefits received in an earlier year. 1040 ez   If you had to repay any railroad retirement benefits that you had included in your income in an earlier year because at that time you thought you had an unrestricted right to it, you can deduct the amount you repaid in the year in which you repaid it. 1040 ez   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. 1040 ez The 2%-of-adjusted-gross-income limit applies to this deduction. 1040 ez You cannot take this deduction if you file Form 1040A. 1040 ez    If you repaid more than $3,000 in 2013, you can either take a deduction for the amount repaid on Schedule A (Form 1040), line 28 or you can take a credit against your tax. 1040 ez For more information, see Repayments in Publication 525. 1040 ez Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. 1040 ez However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. 1040 ez (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. 1040 ez ) 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. 1040 ez See Estimated tax , later. 1040 ez The withholding rules apply to the taxable part of payments you receive from: An employer pension, annuity, profit-sharing, or stock bonus plan, Any other deferred compensation plan, A traditional individual retirement arrangement (IRA), or A commercial annuity. 1040 ez For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. 1040 ez There will be no withholding on any part of a distribution where it is reasonable to believe that it will not be includible in gross income. 1040 ez Choosing no withholding. 1040 ez   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. 1040 ez You can make this choice on Form W-4P for periodic and nonperiodic payments. 1040 ez This choice generally remains in effect until you revoke it. 1040 ez   The payer will ignore your choice not to have tax withheld if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer, before the payment is made, that you gave an incorrect social security number. 1040 ez   To choose not to have tax withheld, a U. 1040 ez S. 1040 ez citizen or resident alien must give the payer a home address in the United States or its possessions. 1040 ez Without that address, the payer must withhold tax. 1040 ez For example, the payer has to withhold tax if the recipient has provided a U. 1040 ez S. 1040 ez address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. 1040 ez S. 1040 ez home address. 1040 ez   If you do not give the payer a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to the payer that you are not a U. 1040 ez S. 1040 ez citizen, a U. 1040 ez S. 1040 ez resident alien, or someone who left the country to avoid tax. 1040 ez But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. 1040 ez This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. 1040 ez For details, get Publication 519. 1040 ez Periodic payments. 1040 ez   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. 1040 ez 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). 1040 ez You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). 1040 ez If you do not, tax will be withheld as if you were married and claiming three withholding allowances. 1040 ez   Tax will be withheld as if you were single and were claiming no withholding allowances if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer (before any payment is made) that you gave an incorrect social security number. 1040 ez   You must file a new withholding certificate to change the amount of withholding. 1040 ez Nonperiodic distributions. 1040 ez    Unless you choose no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. 1040 ez You can also ask the payer to withhold an additional amount using Form W-4P. 1040 ez The part of any loan treated as a distribution (except an offset amount to repay the loan), explained later, is subject to withholding under this rule. 1040 ez Eligible rollover distribution. 1040 ez    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. 1040 ez You cannot choose not to have tax withheld from an eligible rollover distribution. 1040 ez However, tax will not be withheld if you have the plan administrator pay the eligible rollover distribution directly to another qualified plan or an IRA in a direct rollover. 1040 ez For more information about eligible rollover distributions, see Rollovers , later. 1040 ez Estimated tax. 1040 ez   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. 1040 ez Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 return, or 100% of the tax shown on your 2013 return. 1040 ez If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. 1040 ez For more information, get Publication 505, Tax Withholding and Estimated Tax. 1040 ez In figuring your withholding or estimated tax, remember that a part of your monthly social security or equivalent tier 1 railroad retirement benefits may be taxable. 1040 ez See Publication 915. 1040 ez You can choose to have income tax withheld from those benefits. 1040 ez Use Form W-4V to make this choice. 1040 ez Cost (Investment in the Contract) Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). 1040 ez 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. 1040 ez Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. 1040 ez 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). 1040 ez To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. 1040 ez This includes the amounts your employer contributed that were taxable to you when paid. 1040 ez (However, see Foreign employment contributions , later. 1040 ez ) 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). 1040 ez It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). 1040 ez From this total cost you must subtract the following amounts. 1040 ez Any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income and that you received by the later of the annuity starting date or the date on which you received your first payment. 1040 ez Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). 1040 ez If you must use the Simplified Method for your annuity payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. 1040 ez (See Simplified Method , later, for information on its required use. 1040 ez ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. 1040 ez (See General Rule , later, for information on its use. 1040 ez ) Your annuity contract has a refund feature if the annuity payments are for your life (or the lives of you and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated amount or a stated number of payments are made. 1040 ez For more information, see Publication 939. 1040 ez The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . 1040 ez Form 1099-R. 1040 ez If you began receiving periodic payments of a life annuity in 2013, the payer should show your total contributions to the plan in box 9b of your 2013 Form 1099-R. 1040 ez Annuity starting date defined. 1040 ez   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. 1040 ez Example. 1040 ez 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. 1040 ez The annuity starting date is July 1. 1040 ez 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. 1040 ez Designated Roth accounts. 1040 ez   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. 1040 ez Your cost will also include any in-plan Roth rollovers you included in income. 1040 ez Foreign employment contributions. 1040 ez   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. 1040 ez The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (not including the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) but only if the contributions would be excludible from your gross income had they been paid directly to you. 1040 ez Foreign employment contributions while a nonresident alien. 1040 ez   In determining your cost, special rules apply if you are a U. 1040 ez S. 1040 ez citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. 1040 ez Your contributions and your employer's contributions are not included in your cost if the contribution: Was made based on compensation which was for services performed outside the United States while you were a nonresident alien, and Was not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if paid as cash compensation when the services were performed. 1040 ez Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. 1040 ez 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). 1040 ez These payments are also known as amounts received as an annuity. 1040 ez If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. 1040 ez In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. 1040 ez 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). 1040 ez Designated Roth accounts. 1040 ez   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. 1040 ez This applies to both your cost in the account and income earned on that account. 1040 ez A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. 1040 ez   If the distribution is not a qualified distribution, the rules discussed in this section apply. 1040 ez The designated Roth account is treated as a separate contract. 1040 ez Period of participation. 1040 ez   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. 1040 ez Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. 1040 ez   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. 1040 ez   Your 401(k), 403(b), or 457(b) plan may permit you to roll over amounts from those plans to a designated Roth account within the same plan. 1040 ez This is known as an in-plan Roth rollover. 1040 ez For more details, see In-plan Roth rollovers , later. 1040 ez Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no cost in the contract because any of the following situations applies to you (however, see Insurance Premiums for Retired Public Safety Officers , earlier). 1040 ez You did not pay anything or are not considered to have paid anything for your pension or annuity. 1040 ez Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. 1040 ez Your employer did not withhold contributions from your salary. 1040 ez You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). 1040 ez Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. 1040 ez You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. 1040 ez Deductible voluntary employee contributions. 1040 ez   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. 1040 ez Accumulated deductible voluntary employee contributions include net earnings on the contributions. 1040 ez If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. 1040 ez Partly Taxable Payments If you have a cost to recover from your pension or annuity plan (see Cost (Investment in the Contract) , earlier), you can exclude part of each annuity payment from income as a recovery of your cost. 1040 ez 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. 1040 ez The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). 1040 ez You figure the tax-free part of the payment using one of the following methods. 1040 ez Simplified Method. 1040 ez You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). 1040 ez You cannot use this method if your annuity is paid under a nonqualified plan. 1040 ez General Rule. 1040 ez You must use this method if your annuity is paid under a nonqualified plan. 1040 ez You generally cannot use this method if your annuity is paid under a qualified plan. 1040 ez 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. 1040 ez If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. 1040 ez Qualified plan annuity starting before November 19, 1996. 1040 ez   If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract) ) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. 1040 ez If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. 1040 ez If you used the Three-Year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable. 1040 ez Exclusion limit. 1040 ez   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. 1040 ez Once your annuity starting date is determined, it does not change. 1040 ez 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. 1040 ez That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. 1040 ez Exclusion limited to cost. 1040 ez   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. 1040 ez 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. 1040 ez This deduction is not subject to the 2%-of-adjusted-gross-income limit. 1040 ez Example 1. 1040 ez Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. 1040 ez The total cost of your annuity is $12,000. 1040 ez Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). 1040 ez After that, your annuity payments are generally fully taxable. 1040 ez Example 2. 1040 ez The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. 1040 ez You have recovered tax free only $9,600 (8 × $1,200) of your cost. 1040 ez An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. 1040 ez Exclusion not limited to cost. 1040 ez   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. 1040 ez 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. 1040 ez The total exclusion may be more than your cost. 1040 ez Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. 1040 ez 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. 1040 ez For any other annuity, this number is the number of monthly annuity payments under the contract. 1040 ez Who must use the Simplified Method. 1040 ez   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. 1040 ez You receive your pension or annuity payments from any of the following plans. 1040 ez A qualified employee plan. 1040 ez A qualified employee annuity. 1040 ez A tax-sheltered annuity plan (403(b) plan). 1040 ez On your annuity starting date, at least one of the following conditions applies to you. 1040 ez You are under age 75. 1040 ez You are entitled to less than 5 years of guaranteed payments. 1040 ez Guaranteed payments. 1040 ez   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. 1040 ez 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. 1040 ez Annuity starting before November 19, 1996. 1040 ez   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. 1040 ez 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 . 1040 ez Who cannot use the Simplified Method. 1040 ez   You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise do not meet the conditions described in the preceding discussion. 1040 ez See General Rule , later. 1040 ez How to use the Simplified Method. 1040 ez    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. 1040 ez Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. 1040 ez   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. 1040 ez How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. 1040 ez 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. 1040 ez    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. 1040 ez Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. 1040 ez Single-life annuity. 1040 ez   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. 1040 ez Enter on line 3 the number shown for your age on your annuity starting date. 1040 ez This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. 1040 ez Multiple-lives annuity. 1040 ez   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. 1040 ez Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. 1040 ez 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. 1040 ez 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. 1040 ez Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. 1040 ez   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. 1040 ez 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. 1040 ez This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. 1040 ez Fixed-period annuity. 1040 ez   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. 1040 ez Line 6. 1040 ez   The amount on line 6 should include all amounts that could have been recovered in prior years. 1040 ez If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. 1040 ez Example. 1040 ez Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. 1040 ez Bill's annuity starting date is January 1, 2013. 1040 ez The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. 1040 ez Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. 1040 ez 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. 1040 ez 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. 1040 ez 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. 1040 ez His completed worksheet is shown later. 1040 ez Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. 1040 ez Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. 1040 ez The full amount of any annuity payments received after 310 payments are paid must be included in gross income. 1040 ez 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. 1040 ez This deduction is not subject to the 2%-of-adjusted-gross-income limit. 1040 ez Worksheet A. 1040 ez Simplified Method Worksheet for Bill Smith 1. 1040 ez Enter the total pension or annuity payments received this year. 1040 ez Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. 1040 ez $14,400 2. 1040 ez Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. 1040 ez * See Cost (Investment in the Contract) , earlier 2. 1040 ez 31,000   Note. 1040 ez 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). 1040 ez Otherwise, go to line 3. 1040 ez     3. 1040 ez Enter the appropriate number from Table 1 below. 1040 ez 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. 1040 ez 310 4. 1040 ez Divide line 2 by the number on line 3 4. 1040 ez 100 5. 1040 ez Multiply line 4 by the number of months for which this year's payments were made. 1040 ez If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. 1040 ez Otherwise, go to line 6 5. 1040 ez 1,200 6. 1040 ez Enter any amount previously recovered tax free in years after 1986. 1040 ez This is the amount shown on line 10 of your worksheet for last year 6. 1040 ez -0- 7. 1040 ez Subtract line 6 from line 2 7. 1040 ez 31,000 8. 1040 ez Enter the smaller of line 5 or line 7 8. 1040 ez 1,200 9. 1040 ez Taxable amount for year. 1040 ez Subtract line 8 from line 1. 1040 ez Enter the result, but not less than zero. 1040 ez Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. 1040 ez Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. 1040 ez 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. 1040 ez $13,200 10. 1040 ez Was your annuity starting date before 1987? □ Yes. 1040 ez STOP. 1040 ez Do not complete the rest of this worksheet. 1040 ez  ☑ No. 1040 ez Add lines 6 and 8. 1040 ez This is the amount you have recovered tax free through 2013. 1040 ez You will need this number if you need to fill out this worksheet next year 10. 1040 ez 1,200 11. 1040 ez Balance of cost to be recovered. 1040 ez Subtract line 10 from line 2. 1040 ez If zero, you will not have to complete this worksheet next year. 1040 ez The payments you receive next year will generally be fully taxable 11. 1040 ez $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. 1040 ez           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. 1040 ez . 1040 ez . 1040 ez BEFORE November 19, 1996, enter on line 3. 1040 ez . 1040 ez . 1040 ez AFTER November 18, 1996, enter on line 3. 1040 ez . 1040 ez . 1040 ez     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. 1040 ez . 1040 ez . 1040 ez THEN enter on line 3. 1040 ez . 1040 ez . 1040 ez     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. 1040 ez   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. 1040 ez Figure your share by taking the following steps. 1040 ez Complete your worksheet through line 4 to figure the monthly tax-free amount. 1040 ez Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. 1040 ez Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. 1040 ez The result is your share of the monthly tax-free amount. 1040 ez   Replace the amount on line 4 of the worksheet with the result in (3) above. 1040 ez Enter that amount on line 4 of your worksheet each year. 1040 ez General Rule Under the General Rule, you determine the tax-free part of each annuity payment based on the ratio of the cost of the contract to the total expected return. 1040 ez Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. 1040 ez To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. 1040 ez Who must use the General Rule. 1040 ez   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. 1040 ez Annuity starting before November 19, 1996. 1040 ez   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. 1040 ez You also had to use it for any fixed-period annuity. 1040 ez If you did not have to use the General Rule, you could have chosen to use it. 1040 ez 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. 1040 ez   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. 1040 ez Who cannot use the General Rule. 1040 ez   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. 1040 ez See Simplified Method , earlier. 1040 ez More information. 1040 ez   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. 1040 ez Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. 1040 ez Nonperiodic distributions are also known as amounts not received as an annuity. 1040 ez They include all payments other than periodic payments and corrective distributions. 1040 ez For example, the following items are treated as nonperiodic distributions. 1040 ez Cash withdrawals. 1040 ez Distributions of current earnings (dividends) on your investment. 1040 ez However, do not include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract. 1040 ez Certain loans. 1040 ez See Loans Treated as Distributions , later. 1040 ez The value of annuity contracts transferred without full and adequate consideration. 1040 ez See Transfers of Annuity Contracts , later. 1040 ez Corrective distributions of excess plan contributions. 1040 ez   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. 1040 ez To correct an excess, your plan may distribute it to you (along with any income earned on the excess). 1040 ez Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. 1040 ez It is not subject to the allocation rules explained in the following discussion, it cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. 1040 ez    If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “P,” or “E” in box 7. 1040 ez   For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. 1040 ez Figuring the Taxable Amount How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. 1040 ez 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. 1040 ez If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. 1040 ez 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. 1040 ez See Rollovers, later. 1040 ez 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. 1040 ez See Lump-Sum Distributions, later. 1040 ez Annuity starting date. 1040 ez   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. 1040 ez Distributions of employer securities. 1040 ez    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. 1040 ez The NUA is the net increase in the securities' value while they were in the trust. 1040 ez This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. 1040 ez   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. 1040 ez    A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance (within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. 1040 ez    If you choose to include NUA in your income for the year of the distribution and the participant was born before January 2, 1936, you may be able to figure the tax on the NUA using the optional methods described und
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SOI Tax Stats - What's New

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Recent Updates

Exempt Organizations Financial Data—2013 data on tax-exempt organizations were published on Tax Stats. These data include selected financial items from more than 600,000 Forms 990, 990-EZ and 990-PF filed by tax-exempt organizations and processed by the IRS during calendar year 2013. The latest release was expanded to include nearly 500 financial and other data items. The data are in ASCII space-delimited format, and supporting documentation is available.

2013 IRS Data BookThe Internal Revenue Service (IRS) has released the 2013 IRS Data Book, a snapshot of agency activities for Fiscal Year 2013—Oct. 1, 2012, to Sept. 30, 2013. In addition to information on taxes collected and returns processed, the report also includes information about enforcement, taxpayer assistance, and the IRS budget and workforce, among others.

2014 Winter SOI Bulletin—Statistics of Income (SOI) has released the 2014 Winter SOI Bulletin. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers.

This issue of the SOI Bulletin includes articles on the following topics:

  • Individual Income Tax Returns, Preliminary Data, 2012
  • Sales of Capital Assets Panel Data Reported on Individual Tax Returns, 2004–2007
  • Split-Interest Trusts, Filing Year 2012
  • Nonprofit Charitable Organizations, 2010

(March 2014)

Corporation Foreign Tax Credit, 2010Two new tables presenting data from Form 1118, Foreign Tax Credit—Corporations, are now available on SOI’s Tax Stats Webpage. The tables present data from the population of returns filed for Tax Year 2010. Table 1.1 displays data on returns with income in an excess credit position while table 1.2 shows data on returns in an excess limit position. Data presented includes foreign-source income, deductions, and taxes by major and selected minor industry. (February, 2014)

Exempt Organizations Microdata Files, Tax Years 1985–1997—Historical microdata files based on Forms 990 and Forms 990-EZ sampled for the annual studies of nonprofit charitable and other tax-exempt organizations are now available. Annual data are available for organizations exempt from income tax under Internal Revenue Code Section 501(c)(3). Additional data for tax-exempt organizations under IRC Sections 501(c)(4) through 501(c)(9) are available for limited tax years. (February, 2014)

2011 Individual Income Tax ZIP Code and County DataUnited States’ ZIP Code and county data for Tax Year 2011 are now available on Tax Stats. The data present selected income and tax return items by State, ZIP Code, county, and size of adjusted gross income. These data are based on individual income tax returns filed with the IRS. (February, 2014)

Fiduciary Income Tax, 2012—Three tables presenting Filing Year 2012 data for income from estates and trusts (Form 1041) are now available. The statistics cover sources of income and deductions at the National and State levels. Data are classified by trust type and filing status. (February, 2014)

U.S. Gift Tax Returns table Gift Tax, 2012 - One table presenting Filing Year 2012 data for United States Gift (and Generation-Skipping Transfer) Tax Returns (Form 709), including information on total gifts, deductions, credits, and net tax amounts, is now available. Data are presented by tax status and size of total taxable gifts. (January 2014)

2013 Fall SOI Bulletin—Statistics of Income (SOI) has released the 2013 Fall SOI Bulletin. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers.

This issue of the SOI Bulletin includes articles on the following topics:

  • Individual Income Tax Returns, 2011
  • Partnership Returns, 2011
  • Accumulation and Distribution of Individual Retirement Arrangements, 2010

(January 2014)

The Statistics of Income Tax Stats Table Wizard was recently updated! The Table Wizard allows users to query tax data on corporations, individuals, tax-exempt organizations, estates, gifts trusts, and more. The resulting data can then be downloaded. This update includes the following data:

  • Corporate data by industry (Forms 1120 and 1120s)—2004 through 2010
  • 501c(3)  Exempt Organizations (Form 990)—2004 through 2007
  • Domestic Private Foundations and Charitable Trusts (Form 990-PF)—2004 through 2008
  • Unrelated Business Income Tax Returns (Form 990-T)—2006 through 2008
  • Estate Tax Returns (Form 706)—2007 through 2010
  • Gift Tax Returns (Form 709)—2005 through 2010

(December 2013)

2011 Individual Income Tax Estimated Data Line CountsThe 2011 Statistics of Income (SOI) estimated data line counts publication presents estimates of frequencies of taxpayer entries on the lines of the forms and schedules filed with individual tax returns as shown on the 2011 Individual SOI Complete Report file. The statistics are based on a sample of returns that have been weighted to estimate the entire 2011 Tax Year population. The publication includes corresponding dollar amounts of selected lines filed in concurrence with the number of returns filed. (December 2013)

Tax Year 2001–2011 Individual Income Tax Return Statistics by Selected Descending and Ascending Cumulative PercentilesStatistics based on all individual income tax returns by selected descending and ascending cumulative percentiles are now available for Tax Years 2001–2011. Tables present historical statistics on income and tax by cumulative percentiles based on the number of returns. They also show distributions of adjusted gross income (AGI) and total income tax, as defined for each tax year, by descending and ascending cumulative percentiles of returns in both current and constant dollars. These tables can be used to make comparisons across cumulative percentile classes beginning with Tax Year 2001. This release is based on all individual income tax returns except returns of dependents. (December 2013)

2011 Partnership Returns Line Item Estimates (Publication 5035)—This publication presents estimates of frequencies of taxpayer entries recorded on the applicable lines of the forms and schedules filed with partnership tax returns for Tax Year 2011. It also contains corresponding population estimates of dollar amounts recorded on those lines (as applicable). (November 2013)

Partnerships, 2011—Twenty-two tables presenting Tax Year 2011 data for partnership returns (Forms 1065 and 1065-B), including types of partnerships and specific industrial sectors, are now available. The statistics cover balance sheets, trade or business income and deductions, portfolio income, rental income (including rental real estate income), and total net income. Data are classified by industry and size of total assets. In addition, historical tables provide balance sheet and income statement data as well as counts of partnership returns, by size of assets and receipts. 
(November 2013)

Foreign Recipients of US Income Study, 2011 Tax Year—Two tables presenting data for Tax Year 2011 from Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, are now available. The tables include statistics for the number of returns, total income, tax withheld, income subject to withholding, income exempt from withholding, and income by category. Data are available by selected countries and selected recipient types. (October 2013)

Issue Year 2011 Tax-Exempt Bond Tables— Updated tax-exempt bond data for both governmental and private activity bonds issued in calendar year 2011 are now available on Tax Stats. Data include the term of issue, purpose, bond size, and uses of bond proceeds. Tax credit bond data, by bond type, and State-level data, by bond purpose, are also available. (October 2013)

 

 



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The 1040 Ez

1040 ez 5. 1040 ez   Student Loan Cancellations and Repayment Assistance Table of Contents Introduction Student Loan CancellationQualifying Loans Student Loan Repayment Assistance Introduction Generally, if you are responsible for making loan payments, and the loan is canceled (forgiven), you must include the amount that was forgiven in your gross income for tax purposes. 1040 ez However, if you fulfill certain requirements, two types of student loan assistance may be tax free. 1040 ez The types of assistance discussed in this chapter are: Student loan cancellation, and Student loan repayment assistance. 1040 ez Student Loan Cancellation If your student loan is canceled, you may not have to include any amount in income. 1040 ez This section describes the requirements for tax-free treatment of canceled student loans. 1040 ez Qualifying Loans To qualify for tax-free treatment, for the cancellation of your loan, your loan must have been made by a qualified lender to assist you in attending an eligible educational institution and contain a provision that all or part of the debt will be canceled if you work: For a certain period of time, In certain professions, and For any of a broad class of employers. 1040 ez The cancellation of your loan will not qualify for tax-free treatment if it is cancelled because of services you performed for the educational institution that made the loan or other organization that provided the funds. 1040 ez See Exception, later. 1040 ez Eligible educational institution. 1040 ez   This is an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. 1040 ez Qualified lenders. 1040 ez   These include the following. 1040 ez The United States, or an instrumentality thereof. 1040 ez A state, territory, or possession of the United States, or the District of Columbia, or any political subdivision thereof. 1040 ez A public benefit corporation that is tax-exempt under section 501(c)(3); and that has assumed control of a state, county, or municipal hospital; and whose employees are considered public employees under state law. 1040 ez An eligible educational institution, if the loan is made: As part of an agreement with an entity described in (1), (2), (3) under which the funds to make the loan were provided to the educational institution, or Under a program of the educational institution that is designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs where the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt section 501(c)(3) organization. 1040 ez   Occupations with unmet needs include medicine, nursing, teaching, and law. 1040 ez Section 501(c)(3) organization. 1040 ez   This is any corporation, community chest, fund, or foundation organized and operated exclusively for one or more of the following purposes. 1040 ez Charitable. 1040 ez Religious. 1040 ez Educational. 1040 ez Scientific. 1040 ez Literary. 1040 ez Testing for public safety. 1040 ez Fostering national or international amateur sports competition (but only if none of its activities involve providing athletic facilities or equipment). 1040 ez The prevention of cruelty to children or animals. 1040 ez Exception. 1040 ez   The cancellation of your loan does not qualify as tax-free student loan cancellation if your student loan was made by an educational institution and is canceled because of services you performed for the educational institution or other organization that provided the funds. 1040 ez Refinanced Loan If you refinanced a student loan with another loan from an eligible educational institution or a tax-exempt organization, that loan may also be considered as made by a qualified lender. 1040 ez The refinanced loan is considered made by a qualified lender if it is made under a program of the refinancing organization that is designed to encourage students to serve in occupations with unmet needs or in areas with unmet needs where the services required of the students are for or under the direction of a governmental unit or a tax-exempt section 501(c)(3) organization. 1040 ez Student Loan Repayment Assistance Student loan repayments made to you are tax free if you received them for any of the following: The National Health Service Corps (NHSC) Loan Repayment Program (NHSC Loan Repayment Program). 1040 ez A state education loan repayment program eligible for funds under the Public Health Service Act. 1040 ez Any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in under served or health professional shortage areas (as determined by such state). 1040 ez You cannot deduct the interest you paid on a student loan to the extent payments were made through your participation in the above programs. 1040 ez Prev  Up  Next   Home   More Online Publications