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2012 Tax Return Booklet

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2012 Tax Return Booklet

2012 tax return booklet Publication 4492-A - Introductory Material Table of Contents Introduction Useful Items - You may want to see: Introduction This publication explains the temporary tax relief provided by the Food, Conservation, and Energy Act of 2008 for taxpayers in Kiowa County, Kansas, and surrounding areas, who were affected by the storms and tornadoes that began on May 4, 2007. 2012 tax return booklet Useful Items - You may want to see: Publication 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 547 Casualties, Disasters, and Thefts 590 Individual Retirement Arrangements (IRAs) 946 How To Depreciate Property Form (and Instructions) 4506Request for Copy of Tax Return 4506-TRequest for Transcript of Tax Return 4684Casualties and Thefts 5884-ACredits for Employers Affected by Hurricane Katrina, Rita, or Wilma 8606Nondeductible IRAs 8915Qualified Hurricane Retirement Plan Distributions and Repayments See How To Get Tax Help on page 14 for information about getting publications and forms. 2012 tax return booklet Prev  Up  Next   Home   More Online Publications
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TEB Voluntary Compliance

Tax Exempt Bonds (TEB) focuses on providing participants in the municipal bond industry with quality service to assist issuers and conduit borrowers in understanding their tax responsibilities. As part of that service, TEB is providing the following general information for issuers of tax-exempt, tax credit, and direct pay bonds (tax-advantaged bonds) with respect to their post-issuance compliance responsibilities as well as voluntary compliance programs including remedial actions provided under the Income Tax Regulations and the TEB Voluntary Closing Agreement Program (TEB VCAP).

The educational resources provided below are intended to help issuers and other parties locate information and authoritative sources relating to voluntary compliance. The web-based information is not intended to be cited as an authoritative source. TEB recommends that issuers of tax-advantaged bonds review the authoritative sources referenced throughout these educational resources in consultation with their counsel.

  • Section 1 - Post-Issuance Compliance
    This article provides general information on the post-issuance compliance responsibilities of issuers of tax-advantaged bonds. The on-going nature of post-issuance compliance responsibilities requires issuers to be diligent in identifying and resolving noncompliance, on a timely basis, to preserve the preferential status of tax-advantaged bonds.

  • Section 2 - TEB Self-Correction
    This article provides general information on the availability of remedial action provisions under the Income Tax Regulations that issuers of tax-exempt bonds can use to resolve tax violations without the involvement of TEB.

  • Section 3 – TEB Private Letter Rulings
    This article provides an overview description of private letter rulings, including important distinctions between private letter rulings and closing agreements related to tax-advantaged bonds. Revenue Procedure 2011-1 provides formal guidance on the process for requesting private letter rulings.

  • Section 4 - TEB VCAP Administrative Procedures
    TEB administers TEB VCAP to assist issuers in conclusively resolving violations of the federal tax laws applicable to their tax-advantaged bonds in accordance with Notice 2008-31.

  • Section 5 - TEB VCAP Resolution Standards
    TEB VCAP incorporates resolution standards in order to promote due diligence on the part of issuers and other parties to bond transactions in resolving violations of applicable federal tax laws by increasing the transparency of resolution methodologies and providing an economic incentive for issuers to timely identify violations and submit TEB VCAP requests.

  • Section 6 – Feedback on TEB Voluntary Compliance
    TEB invites issuers and other participants in the municipal bond industry to submit questions, comments and suggestions concerning its voluntary compliance programs. Please click here to send an email to TEB and include “TEB Voluntary Compliance” in the subject line of the email.
Page Last Reviewed or Updated: 04-Sep-2013

The 2012 Tax Return Booklet

2012 tax return booklet Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. 2012 tax return booklet A pension is generally a series of payments made to you after you retire from work. 2012 tax return booklet Pension payments are made regularly and are for past services with an employer. 2012 tax return booklet An annuity is a series of payments under a contract. 2012 tax return booklet You can buy the contract alone or you can buy it with the help of your employer. 2012 tax return booklet Annuity payments are made regularly for more than one full year. 2012 tax return booklet Note. 2012 tax return booklet Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. 2012 tax return booklet Types of pensions and annuities. 2012 tax return booklet   Particular types of pensions and annuities include: Fixed period annuities. 2012 tax return booklet You receive definite amounts at regular intervals for a definite length of time. 2012 tax return booklet Annuities for a single life. 2012 tax return booklet You receive definite amounts at regular intervals for life. 2012 tax return booklet The payments end at death. 2012 tax return booklet Joint and survivor annuities. 2012 tax return booklet The first annuitant receives a definite amount at regular intervals for life. 2012 tax return booklet After he or she dies, a second annuitant receives a definite amount at regular intervals for life. 2012 tax return booklet The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. 2012 tax return booklet Variable annuities. 2012 tax return booklet You receive payments that may vary in amount for a definite length of time or for life. 2012 tax return booklet The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. 2012 tax return booklet Disability pensions. 2012 tax return booklet You are under minimum retirement age and receive payments because you retired on disability. 2012 tax return booklet If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. 2012 tax return booklet If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. 2012 tax return booklet 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. 2012 tax return booklet This plan must meet Internal Revenue Code requirements. 2012 tax return booklet It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. 2012 tax return booklet However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. 2012 tax return booklet A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. 2012 tax return booklet A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. 2012 tax return booklet   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. 2012 tax return booklet A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. 2012 tax return booklet It does not qualify for most of the tax benefits of a qualified plan. 2012 tax return booklet Annuity worksheets. 2012 tax return booklet   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. 2012 tax return booklet Request for a ruling. 2012 tax return booklet   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. 2012 tax return booklet This is treated as a request for a ruling. 2012 tax return booklet See Requesting a Ruling on Taxation of Annuity near the end of this publication. 2012 tax return booklet Withholding tax and estimated tax. 2012 tax return booklet   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. 2012 tax return booklet If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. 2012 tax return booklet Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. 2012 tax return booklet 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). 2012 tax return booklet These payments are also known as amounts received as an annuity. 2012 tax return booklet If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. 2012 tax return booklet In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. 2012 tax return booklet The amount of each payment that is more than the part that represents your net cost is taxable. 2012 tax return booklet Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. 2012 tax return booklet These terms are explained in the following discussions. 2012 tax return booklet Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. 2012 tax return booklet First, find your net cost of the contract as of the annuity starting date (defined later). 2012 tax return booklet To find this amount, you must first figure the total premiums, contributions, or other amounts paid. 2012 tax return booklet This includes the amounts your employer contributed if you were required to include these amounts in income. 2012 tax return booklet It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). 2012 tax return booklet From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. 2012 tax return booklet Any additional premiums paid for double indemnity or disability benefits. 2012 tax return booklet Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). 2012 tax return booklet The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. 2012 tax return booklet Example. 2012 tax return booklet 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. 2012 tax return booklet The annuity starting date is July 1. 2012 tax return booklet This is the date you use in figuring your investment in the contract and your expected return (discussed later). 2012 tax return booklet Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. 2012 tax return booklet Foreign employment. 2012 tax return booklet   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. 2012 tax return booklet The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. 2012 tax return booklet Foreign employment contributions while a nonresident alien. 2012 tax return booklet   In determining your cost, special rules apply if you are a U. 2012 tax return booklet S. 2012 tax return booklet citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. 2012 tax return booklet Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. 2012 tax return booklet Death benefit exclusion. 2012 tax return booklet   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. 2012 tax return booklet The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. 2012 tax return booklet How to adjust your total cost. 2012 tax return booklet   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. 2012 tax return booklet Add it to the cost or unrecovered cost of the annuity at the annuity starting date. 2012 tax return booklet See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. 2012 tax return booklet Net cost. 2012 tax return booklet   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. 2012 tax return booklet This is the unrecovered investment in the contract as of the annuity starting date. 2012 tax return booklet If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. 2012 tax return booklet Refund feature. 2012 tax return booklet   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. 2012 tax return booklet Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. 2012 tax return booklet   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. 2012 tax return booklet Zero value of refund feature. 2012 tax return booklet   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. 2012 tax return booklet   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). 2012 tax return booklet   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. 2012 tax return booklet Examples. 2012 tax return booklet The first example shows how to figure the value of the refund feature when there is only one beneficiary. 2012 tax return booklet Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. 2012 tax return booklet In both examples, the taxpayer elects to use Tables V through VIII. 2012 tax return booklet If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. 2012 tax return booklet Example 1. 2012 tax return booklet At age 65, Barbara bought for $21,053 an annuity with a refund feature. 2012 tax return booklet She will get $100 a month for life. 2012 tax return booklet Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. 2012 tax return booklet In this case, the contract cost and the total guaranteed return are the same ($21,053). 2012 tax return booklet Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. 2012 tax return booklet 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. 2012 tax return booklet For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). 2012 tax return booklet In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. 2012 tax return booklet Example 2. 2012 tax return booklet John died while still employed. 2012 tax return booklet His widow, Eleanor, age 48, receives $171 a month for the rest of her life. 2012 tax return booklet John's son, Elmer, age 9, receives $50 a month until he reaches age 18. 2012 tax return booklet John's contributions to the retirement fund totaled $7,559. 2012 tax return booklet 45, with interest on those contributions of $1,602. 2012 tax return booklet 53. 2012 tax return booklet The guarantee or total refund feature of the contract is $9,161. 2012 tax return booklet 98 ($7,559. 2012 tax return booklet 45 plus $1,602. 2012 tax return booklet 53). 2012 tax return booklet The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. 2012 tax return booklet 9 $71,614. 2012 tax return booklet 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. 2012 tax return booklet 0 5,400. 2012 tax return booklet 00   3) Total expected return   $77,014. 2012 tax return booklet 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. 2012 tax return booklet 45   2) Guaranteed amount (contributions of $7,559. 2012 tax return booklet 45 plus interest of $1,602. 2012 tax return booklet 53) $9,161. 2012 tax return booklet 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. 2012 tax return booklet 00   4) Net guaranteed amount $3,761. 2012 tax return booklet 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. 2012 tax return booklet 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. 2012 tax return booklet 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. 2012 tax return booklet See the discussion of expected return, later in this publication. 2012 tax return booklet Free IRS help. 2012 tax return booklet   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. 2012 tax return booklet Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. 2012 tax return booklet The following discussions explain how to figure the expected return with each type of annuity. 2012 tax return booklet A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. 2012 tax return booklet Fixed period annuity. 2012 tax return booklet   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. 2012 tax return booklet It is the total amount you will get beginning at the annuity starting date. 2012 tax return booklet You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). 2012 tax return booklet To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. 2012 tax return booklet Single life annuity. 2012 tax return booklet   If you are to get annuity payments for the rest of your life, find your expected return as follows. 2012 tax return booklet You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. 2012 tax return booklet These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). 2012 tax return booklet   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. 2012 tax return booklet See Adjustments to Tables I, II, V, VI, and VIA following Table I. 2012 tax return booklet Example. 2012 tax return booklet Henry bought an annuity contract that will give him an annuity of $500 a month for his life. 2012 tax return booklet If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. 2012 tax return booklet 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. 2012 tax return booklet 2 multiple by +. 2012 tax return booklet 1. 2012 tax return booklet His expected return would then be $115,800 ($6,000 × 19. 2012 tax return booklet 3). 2012 tax return booklet Annuity for shorter of life or specified period. 2012 tax return booklet   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. 2012 tax return booklet To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. 2012 tax return booklet Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. 2012 tax return booklet Example. 2012 tax return booklet Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. 2012 tax return booklet She was age 65 at her birthday nearest the annuity starting date. 2012 tax return booklet She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. 2012 tax return booklet 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. 2012 tax return booklet See Special Elections, later. 2012 tax return booklet Joint and survivor annuities. 2012 tax return booklet   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. 2012 tax return booklet To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. 2012 tax return booklet If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. 2012 tax return booklet See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. 2012 tax return booklet Example. 2012 tax return booklet John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. 2012 tax return booklet At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. 2012 tax return booklet The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. 2012 tax return booklet 0 Expected return $132,000 Different payments to survivor. 2012 tax return booklet   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. 2012 tax return booklet Example 1. 2012 tax return booklet Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. 2012 tax return booklet If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. 2012 tax return booklet 0 Multiple for Gerald, age 70 (from Table V)   16. 2012 tax return booklet 0 Difference: Multiple applicable to Mary   6. 2012 tax return booklet 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. 2012 tax return booklet 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. 2012 tax return booklet 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. 2012 tax return booklet Your husband died while still employed. 2012 tax return booklet Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. 2012 tax return booklet Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. 2012 tax return booklet You were 50 years old at the annuity starting date. 2012 tax return booklet Marie was 16 and Jean was 14. 2012 tax return booklet Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. 2012 tax return booklet 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. 2012 tax return booklet 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. 2012 tax return booklet 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. 2012 tax return booklet Computation Under the General Rule Note. 2012 tax return booklet Variable annuities use a different computation for determining the exclusion amounts. 2012 tax return booklet See Variable annuities later. 2012 tax return booklet Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. 2012 tax return booklet   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. 2012 tax return booklet See Death benefit exclusion , earlier. 2012 tax return booklet Step 2. 2012 tax return booklet   Figure your expected return. 2012 tax return booklet Step 3. 2012 tax return booklet   Divide Step 1 by Step 2 and round to three decimal places. 2012 tax return booklet This will give you the exclusion percentage. 2012 tax return booklet Step 4. 2012 tax return booklet   Multiply the exclusion percentage by the first regular periodic payment. 2012 tax return booklet The result is the tax-free part of each pension or annuity payment. 2012 tax return booklet   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. 2012 tax return booklet However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. 2012 tax return booklet   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. 2012 tax return booklet Step 5. 2012 tax return booklet   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. 2012 tax return booklet This will give you the tax-free part of the total payment for the year. 2012 tax return booklet    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. 2012 tax return booklet This fractional amount is multiplied by your exclusion percentage to get the tax-free part. 2012 tax return booklet Step 6. 2012 tax return booklet   Subtract the tax-free part from the total payment you received. 2012 tax return booklet The rest is the taxable part of your pension or annuity. 2012 tax return booklet Example 1. 2012 tax return booklet You purchased an annuity with an investment in the contract of $10,800. 2012 tax return booklet Under its terms, the annuity will pay you $100 a month for life. 2012 tax return booklet The multiple for your age (age 65) is 20. 2012 tax return booklet 0 as shown in Table V. 2012 tax return booklet Your expected return is $24,000 (20 × 12 × $100). 2012 tax return booklet Your cost of $10,800, divided by your expected return of $24,000, equals 45. 2012 tax return booklet 0%. 2012 tax return booklet This is the percentage you will not have to include in income. 2012 tax return booklet Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. 2012 tax return booklet If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). 2012 tax return booklet Example 2. 2012 tax return booklet Gerald bought a joint and survivor annuity. 2012 tax return booklet Gerald's investment in the contract is $62,712 and the expected return is $121,200. 2012 tax return booklet The exclusion percentage is 51. 2012 tax return booklet 7% ($62,712 ÷ $121,200). 2012 tax return booklet Gerald will receive $500 a month ($6,000 a year). 2012 tax return booklet Each year, until his net cost is recovered, $3,102 (51. 2012 tax return booklet 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. 2012 tax return booklet If Gerald dies, his wife will receive $350 a month ($4,200 a year). 2012 tax return booklet If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. 2012 tax return booklet 7%). 2012 tax return booklet Each year, until the entire net cost is recovered, his wife will receive $2,171. 2012 tax return booklet 40 (51. 2012 tax return booklet 7% of her payments received of $4,200) tax free. 2012 tax return booklet She will include $2,028. 2012 tax return booklet 60 ($4,200 − $2,171. 2012 tax return booklet 40) in her income tax return. 2012 tax return booklet Example 3. 2012 tax return booklet Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. 2012 tax return booklet Your two daughters each receive annual annuities of $1,800 until they reach age 18. 2012 tax return booklet Your husband contributed $25,576 to the plan. 2012 tax return booklet You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. 2012 tax return booklet Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. 2012 tax return booklet The exclusion percentage of 18. 2012 tax return booklet 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. 2012 tax return booklet Each full year $864 (18. 2012 tax return booklet 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. 2012 tax return booklet Each year, until age 18, $324 (18. 2012 tax return booklet 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. 2012 tax return booklet Part-year payments. 2012 tax return booklet   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. 2012 tax return booklet   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. 2012 tax return booklet For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. 2012 tax return booklet   If you received a fractional payment, follow Step 5, discussed earlier. 2012 tax return booklet This gives you the tax-free part of your total payment. 2012 tax return booklet Example. 2012 tax return booklet On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. 2012 tax return booklet The applicable multiple from Table V is 23. 2012 tax return booklet 3 (age 61). 2012 tax return booklet Her expected return is $34,950 ($125 × 12 × 23. 2012 tax return booklet 3). 2012 tax return booklet Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. 2012 tax return booklet 1%. 2012 tax return booklet Each payment received will consist of 63. 2012 tax return booklet 1% return of cost and 36. 2012 tax return booklet 9% taxable income, until her net cost of the contract is fully recovered. 2012 tax return booklet During the first year, Mary received three payments of $125, or $375, of which $236. 2012 tax return booklet 63 (63. 2012 tax return booklet 1% × $375) is a return of cost. 2012 tax return booklet The remaining $138. 2012 tax return booklet 37 is included in income. 2012 tax return booklet Increase in annuity payments. 2012 tax return booklet   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. 2012 tax return booklet All increases in the installment payments are fully taxable. 2012 tax return booklet   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. 2012 tax return booklet 72-5(a)(5) of the regulations. 2012 tax return booklet Example. 2012 tax return booklet Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. 2012 tax return booklet In figuring the taxable part, Joe elects to use Tables V through VIII. 2012 tax return booklet The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. 2012 tax return booklet His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. 2012 tax return booklet 0 × $1,764 annual payment). 2012 tax return booklet The exclusion percentage is $7,938 ÷ $35,280, or 22. 2012 tax return booklet 5%. 2012 tax return booklet During the year he received 11 monthly payments of $147, or $1,617. 2012 tax return booklet Of this amount, 22. 2012 tax return booklet 5% × $147 × 11 ($363. 2012 tax return booklet 83) is tax free as a return of cost and the balance of $1,253. 2012 tax return booklet 17 is taxable. 2012 tax return booklet Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). 2012 tax return booklet The tax-free part is still only 22. 2012 tax return booklet 5% of the annuity payments as of the annuity starting date (22. 2012 tax return booklet 5% × $147 × 12 = $396. 2012 tax return booklet 90 for a full year). 2012 tax return booklet The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. 2012 tax return booklet Variable annuities. 2012 tax return booklet   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. 2012 tax return booklet   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. 2012 tax return booklet If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. 2012 tax return booklet Example. 2012 tax return booklet Frank purchased a variable annuity at age 65. 2012 tax return booklet The total cost of the contract was $12,000. 2012 tax return booklet The annuity starting date is January 1 of the year of purchase. 2012 tax return booklet His annuity will be paid, starting July 1, in variable annual installments for his life. 2012 tax return booklet The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. 2012 tax return booklet   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. 2012 tax return booklet Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. 2012 tax return booklet The result is added to the previously figured periodic tax-free part. 2012 tax return booklet The sum is the amount of each future payment that will be tax free. 2012 tax return booklet Example. 2012 tax return booklet Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. 2012 tax return booklet Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. 2012 tax return booklet Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. 2012 tax return booklet 00 Amount received in second year 500. 2012 tax return booklet 00 Difference $100. 2012 tax return booklet 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. 2012 tax return booklet 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. 2012 tax return booklet 4) $5. 2012 tax return booklet 43 Revised annual tax-free part for third and later years ($600 + $5. 2012 tax return booklet 43) $605. 2012 tax return booklet 43 Amount taxable in third year ($1,200 − $605. 2012 tax return booklet 43) $594. 2012 tax return booklet 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. 2012 tax return booklet 72–4(d)(3) of the Income Tax Regulations. 2012 tax return booklet The statement must also show the following information: The annuity starting date and your age on that date. 2012 tax return booklet The first day of the first period for which you received an annuity payment in the current year. 2012 tax return booklet Your investment in the contract as originally figured. 2012 tax return booklet The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. 2012 tax return booklet Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. 2012 tax return booklet Exclusion limited to net cost. 2012 tax return booklet   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). 2012 tax return booklet This is the unrecovered investment in the contract as of the annuity starting date. 2012 tax return booklet   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. 2012 tax return booklet This deduction is not subject to the 2%-of-adjusted-gross-income limit. 2012 tax return booklet Example 1. 2012 tax return booklet Your annuity starting date is after 1986. 2012 tax return booklet Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. 2012 tax return booklet There is no refund feature. 2012 tax return booklet Your monthly annuity payment is $833. 2012 tax return booklet 33. 2012 tax return booklet Your exclusion ratio is 12% and you exclude $100 a month. 2012 tax return booklet Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. 2012 tax return booklet Thereafter, your annuity payments are fully taxable. 2012 tax return booklet Example 2. 2012 tax return booklet The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. 2012 tax return booklet The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. 2012 tax return booklet The exclusion ratio is 10. 2012 tax return booklet 8%, and your monthly exclusion is $90. 2012 tax return booklet After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). 2012 tax return booklet An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. 2012 tax return booklet Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. 2012 tax return booklet Exclusion not limited to net cost. 2012 tax return booklet   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. 2012 tax return booklet If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. 2012 tax return booklet The total exclusion may be more than your investment in the contract. 2012 tax return booklet How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. 2012 tax return booklet Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. 2012 tax return booklet These tables correspond to the old Tables I through IV. 2012 tax return booklet In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. 2012 tax return booklet If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. 2012 tax return booklet However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). 2012 tax return booklet Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. 2012 tax return booklet Contributions made both before July 1986 and after June 1986. 2012 tax return booklet   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. 2012 tax return booklet (See the examples below. 2012 tax return booklet )    Making the election. 2012 tax return booklet Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. 2012 tax return booklet 72–6 of the Income Tax Regulations. 2012 tax return booklet ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. 2012 tax return booklet   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. 2012 tax return booklet You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. 2012 tax return booklet    Advantages of election. 2012 tax return booklet In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. 2012 tax return booklet    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. 2012 tax return booklet If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. 2012 tax return booklet   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. 2012 tax return booklet Example 1. 2012 tax return booklet Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. 2012 tax return booklet Payment of the $42,000 contribution is guaranteed under a refund feature. 2012 tax return booklet Bill is 55 years old as of the annuity starting date. 2012 tax return booklet For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. 2012 tax return booklet       Pre- July 1986   Post- June 1986 A. 2012 tax return booklet Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. 2012 tax return booklet of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. 2012 tax return booklet Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. 2012 tax return booklet Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. 2012 tax return booklet 7   28. 2012 tax return booklet 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. 2012 tax return booklet Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . 2012 tax return booklet 079   . 2012 tax return booklet 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). 2012 tax return booklet The taxable part of his annuity is $22,080 ($24,000 minus $1,920). 2012 tax return booklet If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). 2012 tax return booklet Example 2. 2012 tax return booklet Al is age 62 at his nearest birthday to the annuity starting date. 2012 tax return booklet Al's wife is age 60 at her nearest birthday to the annuity starting date. 2012 tax return booklet The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. 2012 tax return booklet The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. 2012 tax return booklet Al makes the election described in Example 1 . 2012 tax return booklet For purposes of this example, assume the refund feature adjustment is zero. 2012 tax return booklet If an adjustment is required, IRS will figure the amount. 2012 tax return booklet See Requesting a Ruling on Taxation of Annuity near the end of this publication. 2012 tax return booklet       Pre-  July 1986   Post-  June 1986 A. 2012 tax return booklet Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. 2012 tax return booklet Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. 2012 tax return booklet Expected return         1) Multiple for both annuitants from Tables II and VI 25. 2012 tax return booklet 4   28. 2012 tax return booklet 8   2) Multiple for first annuitant from Tables I and V 16. 2012 tax return booklet 9   22. 2012 tax return booklet 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. 2012 tax return booklet 5   6. 2012 tax return booklet 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. 2012 tax return booklet Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . 2012 tax return booklet 209   . 2012 tax return booklet 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). 2012 tax return booklet The taxable part of his annuity is $9,216 ($12,000 − $2,784). 2012 tax return booklet The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. 2012 tax return booklet After Al's death, his widow will apply the same exclusion percentages (20. 2012 tax return booklet 9% and 2. 2012 tax return booklet 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. 2012 tax return booklet Annuity received after June 30, 1986. 2012 tax return booklet   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. 2012 tax return booklet Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. 2012 tax return booklet    Make the election by attaching the following statement to your income tax return. 2012 tax return booklet    “I elect, under section 1. 2012 tax return booklet 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. 2012 tax return booklet ”   The statement must also include your name, address, and social security number. 2012 tax return booklet   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. 2012 tax return booklet Disqualifying form of payment or settlement. 2012 tax return booklet   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. 2012 tax return booklet See regulations section 1. 2012 tax return booklet 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. 2012 tax return booklet You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. 2012 tax return booklet Worksheets for Determining Taxable Annuity Worksheets I and II. 2012 tax return booklet   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. 2012 tax return booklet 72–6(d)(6) Election. 2012 tax return booklet Worksheet I For Determining Taxable Annuity Under Regulations Section 1. 2012 tax return booklet 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. 2012 tax return booklet   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. 2012 tax return booklet )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. 2012 tax return booklet If not, the IRS will calculate the refund feature percentage. 2012 tax return booklet             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. 2012 tax return booklet   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. 2012 tax return booklet   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. 2012 tax return booklet   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. 2012 tax return booklet     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. 2012 tax return booklet 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. 2012 tax return booklet   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. 2012 tax return booklet )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. 2012 tax return booklet If not, the IRS will calculate the refund feature percentage. 2012 tax return booklet             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. 2012 tax return booklet   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. 2012 tax return booklet   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. 2012 tax return booklet Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. 2012 tax return booklet   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. 2012 tax return booklet   Actuarial Tables Please click here for the text description of the image. 2012 tax return booklet Actuarial Tables Please click here for the text description of the image. 2012 tax return booklet Actuarial Tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Please click here for the text description of the image. 2012 tax return booklet Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. 2012 tax return booklet If you make this request, you are asking for a ruling. 2012 tax return booklet User fee. 2012 tax return booklet   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. 2012 tax return booklet You should call the IRS for the proper fee. 2012 tax return booklet A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. 2012 tax return booklet Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. 2012 tax return booklet O. 2012 tax return booklet Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. 2012 tax return booklet When to make the request. 2012 tax return booklet   Please note that requests sent between February 1 and April 15 may experience some delay. 2012 tax return booklet We process requests in the order received, and we will reply to your request as soon as we can process it. 2012 tax return booklet If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. 2012 tax return booklet S. 2012 tax return booklet Individual Income Tax Return, to get an extension of time to file. 2012 tax return booklet Information you must furnish. 2012 tax return booklet   You must furnish the information listed below so the IRS can comply with your request. 2012 tax return booklet Failure to furnish the information will result in a delay in processing your request. 2012 tax return booklet Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. 2012 tax return booklet Copies of any documents showing distributions, annuity rates, and annuity options available to you. 2012 tax return booklet A copy of any Form 1099–R you received since your annuity began. 2012 tax return booklet A statement indicating whether you have filed your return for the year for which you are making the request. 2012 tax return booklet If you have requested an extension of time to file that return, please indicate the extension date. 2012 tax return booklet Your daytime phone number. 2012 tax return booklet Your current mailing address. 2012 tax return booklet A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. 2012 tax return booklet Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. 2012 tax return booklet A completed Tax Information Sheet (or facsimile) shown on the next page. 2012 tax return booklet Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. 2012 tax return booklet This statement must be signed by the retiree or the survivor annuitant. 2012 tax return booklet It cannot be signed by a representative. 2012 tax return booklet Tax Information Sheet Please click here for the text description of the image. 2012 tax return booklet Tax Information Sheet Please click here for the text description of the image. 2012 tax return booklet Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. 2012 tax return booklet Free help with your tax return. 2012 tax return booklet   You can get free help preparing your return nationwide from IRS-certified volunteers. 2012 tax return booklet The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. 2012 tax return booklet The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 2012 tax return booklet Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 2012 tax return booklet In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. 2012 tax return booklet To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. 2012 tax return booklet gov, download the IRS2Go app, or call 1-800-906-9887. 2012 tax return booklet   As part of the TCE program, AARP offers the Tax-Aide counseling program. 2012 tax return booklet To find the nearest AARP Tax-Aide site, visit AARP's website at www. 2012 tax return booklet aarp. 2012 tax return booklet org/money/taxaide or call 1-888-227-7669. 2012 tax return booklet For more information on these programs, go to IRS. 2012 tax return booklet gov and enter “VITA” in the search box. 2012 tax return booklet Internet. 2012 tax return booklet    IRS. 2012 tax return booklet gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. 2012 tax return booklet Download the free IRS2Go app from the iTunes app store or from Google Play. 2012 tax return booklet Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 2012 tax return booklet Check the status of your 2013 refund with the Where's My Refund? application on IRS. 2012 tax return booklet gov or download the IRS2Go app and select the Refund Status option. 2012 tax return booklet The IRS issues more than 9 out of 10 refunds in less than 21 days. 2012 tax return booklet Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. 2012 tax return booklet You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. 2012 tax return booklet The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 2012 tax return booklet Use the Interactive Tax Assistant (ITA) to research your tax questions. 2012 tax return booklet No need to wait on the phone or stand in line. 2012 tax return booklet The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. 2012 tax return booklet When you reach the response screen, you can print the entire interview and the final response for your records. 2012 tax return booklet New subject areas are added on a regular basis. 2012 tax return booklet  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. 2012 tax return booklet gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. 2012 tax return booklet You can use the IRS Tax Map, to search publications and instructions by topic or keyword. 2012 tax return booklet The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. 2012 tax return booklet When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. 2012 tax return booklet Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. 2012 tax return booklet You can also ask the IRS to mail a return or an account transcript to you. 2012 tax return booklet Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. 2012 tax return booklet gov or by calling 1-800-908-9946. 2012 tax return booklet Tax return and tax account transcripts are generally available for the current year and the past three years. 2012 tax return booklet Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. 2012 tax return booklet Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. 2012 tax return booklet If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. 2012 tax return booklet Check the status of your amended return using Where's My Amended Return? Go to IRS. 2012 tax return booklet gov and enter Where's My Amended Return? in the search box. 2012 tax return booklet You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 2012 tax return booklet It can take up to 3 weeks from the date you mailed it to show up in our system. 2012 tax return booklet Make a payment using one of several safe and convenient electronic payment options available on IRS. 2012 tax return booklet gov. 2012 tax return booklet Select the Payment tab on the front page of IRS. 2012 tax return booklet gov for more information. 2012 tax return booklet Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. 2012 tax return booklet Figure your income tax withholding with the IRS Withholding Calculator on IRS. 2012 tax return booklet gov. 2012 tax return booklet Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. 2012 tax return booklet Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. 2012 tax return booklet gov. 2012 tax return booklet Request an Electronic Filing PIN by going to IRS. 2012 tax return booklet gov and entering Electronic Filing PIN in the search box. 2012 tax return booklet Download forms, instructions and publications, including accessible versions for people with disabilities. 2012 tax return booklet Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. 2012 tax return booklet gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. 2012 tax return booklet An employee can answer questions about your tax account or help you set up a payment plan. 2012 tax return booklet Before you visit, check the Office Locator on IRS. 2012 tax return booklet gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. 2012 tax return booklet If you have a special need, such as a disability, you can request an appointment. 2012 tax return booklet Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 2012 tax return booklet Apply for an Employer Identification Number (EIN). 2012 tax return booklet Go to IRS. 2012 tax return booklet gov and enter Apply for an EIN in the search box. 2012 tax return booklet Read the Internal Revenue Code, regulations, or other official guidance. 2012 tax return booklet Read Internal Revenue Bulletins. 2012 tax return booklet Sign up to receive local and national tax news and more by email. 2012 tax return booklet Just click on “subscriptions” above the search box on IRS. 2012 tax return booklet gov and choose from a variety of options. 2012 tax return booklet    Phone. 2012 tax return booklet You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 2012 tax return booklet Download the free IRS2Go app from the iTunes app store or from Google Play. 2012 tax return booklet Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. 2012 tax return booklet gov, or download the IRS2Go app. 2012 tax return booklet Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 2012 tax return booklet The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 2012 tax return booklet Mos