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Federal Amended Tax Return

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Federal Amended Tax Return

Federal amended tax return Internal Revenue Bulletin:  2012-14  April 2, 2012  Rev. Federal amended tax return Proc. Federal amended tax return 2012-23 Table of Contents SECTION 1. Federal amended tax return PURPOSE SECTION 2. Federal amended tax return BACKGROUND SECTION 3. Federal amended tax return SCOPE SECTION 4. Federal amended tax return APPLICATION. Federal amended tax return 01 Limitations on Depreciation Deductions for Certain Automobiles. Federal amended tax return . Federal amended tax return 02 Inclusions in Income of Lessees of Passenger Automobiles. Federal amended tax return SECTION 5. Federal amended tax return EFFECTIVE DATE SECTION 6. Federal amended tax return DRAFTING INFORMATION SECTION 1. Federal amended tax return PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2012, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2012, including a separate table of inclusion amounts for lessees of trucks and vans. Federal amended tax return The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. Federal amended tax return SECTION 2. Federal amended tax return BACKGROUND . Federal amended tax return 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Federal amended tax return For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. Federal amended tax return The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Federal amended tax return This change reflects the higher rate of price inflation for trucks and vans since 1988. Federal amended tax return . Federal amended tax return 02 Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. Federal amended tax return L. Federal amended tax return No. Federal amended tax return 111-312, 124 Stat. Federal amended tax return 3296 (Dec. Federal amended tax return 17, 2010) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. Federal amended tax return Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. Federal amended tax return . Federal amended tax return 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Federal amended tax return Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Federal amended tax return Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv)). Federal amended tax return Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. Federal amended tax return This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2012 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. Federal amended tax return . Federal amended tax return 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Federal amended tax return The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Federal amended tax return Under § 1. Federal amended tax return 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Federal amended tax return One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Federal amended tax return Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Federal amended tax return SECTION 3. Federal amended tax return SCOPE . Federal amended tax return 01 The limitations on depreciation deductions in section 4. Federal amended tax return 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2012, and continue to apply for each taxable year that the passenger automobile remains in service. Federal amended tax return . Federal amended tax return 02 The tables in section 4. Federal amended tax return 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2012. Federal amended tax return Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Federal amended tax return See Rev. Federal amended tax return Proc. Federal amended tax return 2007-30, 2007-1 C. Federal amended tax return B. Federal amended tax return 1104, for passenger automobiles first leased during calendar year 2007; Rev. Federal amended tax return Proc. Federal amended tax return 2008-22, 2008-1 C. Federal amended tax return B. Federal amended tax return 658, for passenger automobiles first leased during calendar year 2008; Rev. Federal amended tax return Proc. Federal amended tax return 2009-24, 2009-17 I. Federal amended tax return R. Federal amended tax return B. Federal amended tax return 885, for passenger automobiles first leased during calendar year 2009; Rev. Federal amended tax return Proc. Federal amended tax return 2010-18, 2010-9 I. Federal amended tax return R. Federal amended tax return B. Federal amended tax return 427, as amplified and modified by section 4. Federal amended tax return 03 of Rev. Federal amended tax return Proc. Federal amended tax return 2011-21, 2011-12 I. Federal amended tax return R. Federal amended tax return B. Federal amended tax return 560, for passenger automobiles first leased during calendar year 2010; and Rev. Federal amended tax return Proc. Federal amended tax return 2011-21, for passenger automobiles first leased during calendar year 2011. Federal amended tax return SECTION 4. Federal amended tax return APPLICATION . Federal amended tax return 01 Limitations on Depreciation Deductions for Certain Automobiles. Federal amended tax return (1) Amount of the inflation adjustment. Federal amended tax return (a) Passenger automobiles (other than trucks or vans). Federal amended tax return Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Federal amended tax return Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Federal amended tax return The new car component of the CPI was 115. Federal amended tax return 2 for October 1987 and 143. Federal amended tax return 419 for October 2011. Federal amended tax return The October 2011 index exceeded the October 1987 index by 28. Federal amended tax return 219. Federal amended tax return Therefore, the automobile price inflation adjustment for 2012 for passenger automobiles (other than trucks and vans) is 24. Federal amended tax return 5 percent (28. Federal amended tax return 219/115. Federal amended tax return 2 x 100%). Federal amended tax return The dollar limitations in § 280F(a) are multiplied by a factor of 0. Federal amended tax return 245, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2012. Federal amended tax return This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2012. Federal amended tax return (b) Trucks and vans. Federal amended tax return To determine the dollar limitations for trucks and vans first placed in service during calendar year 2012, the Service uses the new truck component of the CPI instead of the new car component. Federal amended tax return The new truck component of the CPI was 112. Federal amended tax return 4 for October 1987 and 146. Federal amended tax return 607 for October 2011. Federal amended tax return The October 2011 index exceeded the October 1987 index by 34. Federal amended tax return 207. Federal amended tax return Therefore, the automobile price inflation adjustment for 2012 for trucks and vans is 30. Federal amended tax return 43 percent (34. Federal amended tax return 207/112. Federal amended tax return 4 x 100%). Federal amended tax return The dollar limitations in § 280F(a) are multiplied by a factor of 0. Federal amended tax return 3043, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Federal amended tax return This adjustment applies to all trucks and vans that are first placed in service in calendar year 2012. Federal amended tax return (2) Amount of the limitation. Federal amended tax return Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2012. Federal amended tax return Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction applies. Federal amended tax return Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction does not apply. Federal amended tax return REV. Federal amended tax return PROC. Federal amended tax return 2012-23 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Federal amended tax return PROC. Federal amended tax return 2012-23 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. Federal amended tax return PROC. Federal amended tax return 2012-23 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Federal amended tax return PROC. Federal amended tax return 2012-23 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 . Federal amended tax return 02 Inclusions in Income of Lessees of Passenger Automobiles. Federal amended tax return A taxpayer must follow the procedures in § 1. Federal amended tax return 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2012. Federal amended tax return In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. Federal amended tax return REV. Federal amended tax return PROC. Federal amended tax return 2012-23 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 2 4 5 6 8 19,000 19,500 2 4 7 7 9 19,500 20,000 2 5 8 8 10 20,000 20,500 3 5 9 10 11 20,500 21,000 3 6 9 12 12 21,000 21,500 3 7 10 12 14 21,500 22,000 3 8 11 13 16 22,000 23,000 4 8 13 15 17 23,000 24,000 4 10 15 17 20 24,000 25,000 5 11 17 19 23 25,000 26,000 6 12 19 21 26 26,000 27,000 6 14 20 24 28 27,000 28,000 7 15 22 26 31 28,000 29,000 7 16 25 28 33 29,000 30,000 8 18 25 32 35 30,000 31,000 9 19 27 34 38 31,000 32,000 9 20 30 36 41 32,000 33,000 10 21 32 38 43 33,000 34,000 10 23 33 41 46 34,000 35,000 11 24 35 43 49 35,000 36,000 12 25 37 45 52 36,000 37,000 12 27 39 47 54 37,000 38,000 13 28 41 49 57 38,000 39,000 13 29 43 52 59 39,000 40,000 14 30 45 54 62 40,000 41,000 14 32 47 56 65 41,000 42,000 15 33 49 58 68 42,000 43,000 16 34 51 61 70 43,000 44,000 16 36 52 63 73 44,000 45,000 17 37 54 66 75 45,000 46,000 17 38 57 67 78 46,000 47,000 18 39 59 70 80 47,000 48,000 19 40 61 72 83 48,000 49,000 19 42 62 75 86 49,000 50,000 20 43 64 77 89 50,000 51,000 20 45 66 79 91 51,000 52,000 21 46 68 81 94 52,000 53,000 21 47 70 84 96 53,000 54,000 22 48 72 86 99 54,000 55,000 23 49 74 88 102 55,000 56,000 23 51 76 90 104 56,000 57,000 24 52 78 92 107 57,000 58,000 24 54 79 95 110 58,000 59,000 25 55 81 97 113 59,000 60,000 26 56 83 100 115 60,000 62,000 26 58 86 103 119 62,000 64,000 28 60 90 108 124 64,000 66,000 29 63 94 112 129 66,000 68,000 30 66 97 117 135 68,000 70,000 31 68 102 121 140 70,000 72,000 32 71 105 126 145 72,000 74,000 33 74 109 130 151 74,000 76,000 35 76 113 135 156 76,000 78,000 36 78 117 140 161 78,000 80,000 37 81 120 145 166 80,000 85,000 39 86 127 152 176 85,000 90,000 42 92 137 163 189 90,000 95,000 45 98 147 175 202 95,000 100,000 48 105 155 187 215 100,000 110,000 52 115 170 203 235 110,000 120,000 58 127 189 227 262 120,000 130,000 64 140 208 250 288 130,000 140,000 70 153 227 272 315 140,000 150,000 75 166 246 296 340 150,000 160,000 81 179 265 318 368 160,000 170,000 87 192 284 341 394 170,000 180,000 93 204 304 364 420 180,000 190,000 99 217 323 387 446 190,000 200,000 105 230 342 409 473 200,000 210,000 111 243 361 432 499 210,000 220,000 116 256 380 455 526 220,000 230,000 122 269 399 478 552 230,000 240,000 128 282 418 501 578 240,000 and up 134 294 437 524 605 REV. Federal amended tax return PROC. Federal amended tax return 2012-23 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $19,000 $19,500 1 4 5 6 7 19,500 20,000 2 4 6 7 9 20,000 20,500 2 5 7 8 10 20,500 21,000 2 5 8 10 11 21,000 21,500 3 6 9 10 13 21,500 22,000 3 6 10 12 14 22,000 23,000 3 8 11 14 15 23,000 24,000 4 9 13 16 18 24,000 25,000 4 10 15 19 21 25,000 26,000 5 11 17 21 24 26,000 27,000 6 12 19 23 26 27,000 28,000 6 14 21 25 29 28,000 29,000 7 15 23 27 32 29,000 30,000 7 17 24 30 34 30,000 31,000 8 18 26 32 37 31,000 32,000 9 19 28 34 40 32,000 33,000 9 20 31 36 42 33,000 34,000 10 21 33 39 44 34,000 35,000 10 23 34 41 48 35,000 36,000 11 24 36 44 50 36,000 37,000 12 25 38 46 53 37,000 38,000 12 27 40 48 55 38,000 39,000 13 28 42 50 58 39,000 40,000 13 29 44 53 60 40,000 41,000 14 31 45 55 63 41,000 42,000 14 32 48 57 66 42,000 43,000 15 33 50 59 69 43,000 44,000 16 34 52 61 72 44,000 45,000 16 36 53 64 74 45,000 46,000 17 37 55 66 77 46,000 47,000 17 38 58 68 79 47,000 48,000 18 40 59 70 82 48,000 49,000 19 41 61 73 84 49,000 50,000 19 42 63 75 87 50,000 51,000 20 43 65 78 89 51,000 52,000 20 45 66 80 93 52,000 53,000 21 46 68 83 95 53,000 54,000 21 48 70 84 98 54,000 55,000 22 49 72 87 100 55,000 56,000 23 50 74 89 103 56,000 57,000 23 51 76 92 105 57,000 58,000 24 52 78 94 108 58,000 59,000 24 54 80 96 111 59,000 60,000 25 55 82 98 114 60,000 62,000 26 57 85 101 118 62,000 64,000 27 60 88 106 123 64,000 66,000 28 62 93 110 128 66,000 68,000 29 65 96 115 134 68,000 70,000 30 67 100 120 139 70,000 72,000 32 70 103 125 144 72,000 74,000 33 72 108 129 149 74,000 76,000 34 75 111 134 155 76,000 78,000 35 78 115 138 160 78,000 80,000 36 80 119 143 165 80,000 85,000 38 85 125 151 175 85,000 90,000 41 91 135 163 187 90,000 95,000 44 98 144 174 201 95,000 100,000 47 104 154 185 214 100,000 110,000 52 113 169 202 234 110,000 120,000 57 127 187 225 261 120,000 130,000 63 139 207 248 287 130,000 140,000 69 152 226 271 313 140,000 150,000 75 165 245 294 339 150,000 160,000 81 178 264 316 366 160,000 170,000 87 190 283 340 392 170,000 180,000 92 204 302 362 419 180,000 190,000 98 216 322 385 445 190,000 200,000 104 229 340 409 471 200,000 210,000 110 242 359 431 498 210,000 220,000 116 255 378 454 524 220,000 230,000 122 267 398 477 551 230,000 240,000 127 281 416 500 577 240,000 and up 133 294 435 523 603 SECTION 5. Federal amended tax return EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2012. Federal amended tax return SECTION 6. Federal amended tax return DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Federal amended tax return Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Federal amended tax return For further information regarding this revenue procedure, contact Mr. Federal amended tax return Harvey at (202) 622-4930 (not a toll-free call). Federal amended tax return Prev  Up  Next   Home   More Internal Revenue Bulletins
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The Federal Amended Tax Return

Federal amended tax return 10. Federal amended tax return   Retirement Plans, Pensions, and Annuities Table of Contents What's New Reminder IntroductionThe General Rule. Federal amended tax return Individual retirement arrangements (IRAs). Federal amended tax return Civil service retirement benefits. Federal amended tax return Useful Items - You may want to see: General InformationIn-plan rollovers to designated Roth accounts. Federal amended tax return How To Report Cost (Investment in the Contract) Taxation of Periodic PaymentsExclusion limited to cost. Federal amended tax return Exclusion not limited to cost. Federal amended tax return Simplified Method Taxation of Nonperiodic PaymentsLump-Sum Distributions RolloversIn-plan rollovers to designated Roth accounts. Federal amended tax return Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and Beneficiaries What's New For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). Federal amended tax return However, these distributions are taken into account when determining the modified adjusted gross income threshold. Federal amended tax return Distributions from a nonqualified retirement plan are included in net investment income. Federal amended tax return See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. Federal amended tax return Reminder Starting in 2013, the American Taxpayer Relief Act of 2012 expanded the rules for in-plan Roth rollovers to include more taxpayers. Federal amended tax return For more information, see Designated Roth accounts discussed later. Federal amended tax return Introduction This chapter discusses the tax treatment of distributions you receive from: An employee pension or annuity from a qualified plan, A disability retirement, and A purchased commercial annuity. Federal amended tax return What is not covered in this chapter. Federal amended tax return   The following topics are not discussed in this chapter. Federal amended tax return The General Rule. Federal amended tax return   This is the method generally used to determine the tax treatment of pension and annuity income from nonqualified plans (including commercial annuities). Federal amended tax return For a qualified plan, you generally cannot use the General Rule unless your annuity starting date is before November 19, 1996. Federal amended tax return For more information about the General Rule, see Publication 939, General Rule for Pensions and Annuities. Federal amended tax return Individual retirement arrangements (IRAs). Federal amended tax return   Information on the tax treatment of amounts you receive from an IRA is in chapter 17. Federal amended tax return Civil service retirement benefits. Federal amended tax return    If you are retired from the federal government (regular, phased, or disability retirement), see Publication 721, Tax Guide to U. Federal amended tax return S. Federal amended tax return Civil Service Retirement Benefits. Federal amended tax return Publication 721 also covers the information that you need if you are the survivor or beneficiary of a federal employee or retiree who died. Federal amended tax return Useful Items - You may want to see: Publication 575 Pension and Annuity Income 721 Tax Guide to U. Federal amended tax return S. Federal amended tax return Civil Service Retirement Benefits 939 General Rule for Pensions and Annuities Form (and Instructions) W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Federal amended tax return 4972 Tax on Lump-Sum Distributions 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts General Information Designated Roth accounts. Federal amended tax return   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. Federal amended tax return Elective deferrals that are designated as Roth contributions are included in your income. Federal amended tax return However, qualified distributions are not included in your income. Federal amended tax return See Publication 575 for more information. Federal amended tax return In-plan rollovers to designated Roth accounts. Federal amended tax return   If you are a participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. Federal amended tax return The rollover of any untaxed amounts must be included in income. Federal amended tax return See Publication 575 for more information. Federal amended tax return More than one program. Federal amended tax return   If you receive benefits from more than one program under a single trust or plan of your employer, such as a pension plan and a profit-sharing plan, you may have to figure the taxable part of each pension or annuity contract separately. Federal amended tax return Your former employer or the plan administrator should be able to tell you if you have more than one pension or annuity contract. Federal amended tax return Section 457 deferred compensation plans. Federal amended tax return    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. Federal amended tax return 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. Federal amended tax return You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. Federal amended tax return You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. Federal amended tax return   Your 457(b) plan may have a designated Roth account option. Federal amended tax return If so, you may be able to roll over amounts to the designated Roth account or make contributions. Federal amended tax return Elective deferrals to a designated Roth account are included in your income. Federal amended tax return Qualified distributions from a designated Roth account are not subject to tax. Federal amended tax return   This chapter covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. Federal amended tax return For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525, Taxable and Nontaxable Income. Federal amended tax return   For general information on these deferred compensation plans, see Section 457 Deferred Compensation Plans in Publication 575. Federal amended tax return Disability pensions. Federal amended tax return   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. Federal amended tax return You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. Federal amended tax return Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Federal amended tax return    You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Federal amended tax return For information on the credit for the elderly or the disabled, see chapter 33. Federal amended tax return   Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Federal amended tax return Report the payments on Form 1040, lines 16a and 16b, or on Form 1040A, lines 12a and 12b. Federal amended tax return    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. Federal amended tax return For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. Federal amended tax return   For more information on how to report disability pensions, including military and certain government disability pensions, see chapter 5. Federal amended tax return Retired public safety officers. Federal amended tax return   An eligible retired public safety officer can elect to exclude from income distributions of up to $3,000 made directly from a government retirement plan to the provider of accident, health, or long-term disability insurance. Federal amended tax return See Insurance Premiums for Retired Public Safety Officers in Publication 575 for more information. Federal amended tax return Railroad retirement benefits. Federal amended tax return   Part of any railroad retirement benefits you receive is treated for tax purposes as social security benefits, and part is treated as an employee pension. Federal amended tax return For information about railroad retirement benefits treated as social security benefits, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Federal amended tax return For information about railroad retirement benefits treated as an employee pension, see Railroad Retirement Benefits in Publication 575. Federal amended tax return Withholding and estimated tax. Federal amended tax return   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable parts of amounts paid to you. Federal amended tax return You can tell the payer how much to withhold, or not to withhold, by filing Form W-4P. Federal amended tax return If you choose not to have tax withheld, or you do not have enough tax withheld, you may have to pay estimated tax. Federal amended tax return   If you receive an eligible rollover distribution, you cannot choose not to have tax withheld. Federal amended tax return Generally, 20% will be withheld, but no tax will be withheld on a direct rollover of an eligible rollover distribution. Federal amended tax return See Direct rollover option under Rollovers, later. Federal amended tax return   For more information, see Pensions and Annuities under Tax Withholding for 2014 in chapter 4. Federal amended tax return Qualified plans for self-employed individuals. Federal amended tax return   Qualified plans set up by self-employed individuals are sometimes called Keogh or H. Federal amended tax return R. Federal amended tax return 10 plans. Federal amended tax return Qualified plans can be set up by sole proprietors, partnerships (but not a partner), and corporations. Federal amended tax return They can cover self-employed persons, such as the sole proprietor or partners, as well as regular (common-law) employees. Federal amended tax return    Distributions from a qualified plan are usually fully taxable because most recipients have no cost basis. Federal amended tax return If you have an investment (cost) in the plan, however, your pension or annuity payments from a qualified plan are taxed under the Simplified Method. Federal amended tax return For more information about qualified plans, see Publication 560, Retirement Plans for Small Business. Federal amended tax return Purchased annuities. Federal amended tax return   If you receive pension or annuity payments from a privately purchased annuity contract from a commercial organization, such as an insurance company, you generally must use the General Rule to figure the tax-free part of each annuity payment. Federal amended tax return For more information about the General Rule, get Publication 939. Federal amended tax return Also, see Variable Annuities in Publication 575 for the special provisions that apply to these annuity contracts. Federal amended tax return Loans. Federal amended tax return   If you borrow money from your retirement plan, you must treat the loan as a nonperiodic distribution from the plan unless certain exceptions apply. Federal amended tax return This treatment also applies to any loan under a contract purchased under your retirement plan, and to the value of any part of your interest in the plan or contract that you pledge or assign. Federal amended tax return This means that you must include in income all or part of the amount borrowed. Federal amended tax return Even if you do not have to treat the loan as a nonperiodic distribution, you may not be able to deduct the interest on the loan in some situations. Federal amended tax return For details, see Loans Treated as Distributions in Publication 575. Federal amended tax return For information on the deductibility of interest, see chapter 23. Federal amended tax return Tax-free exchange. Federal amended tax return   No gain or loss is recognized on an exchange of an annuity contract for another annuity contract if the insured or annuitant remains the same. Federal amended tax return However, if an annuity contract is exchanged for a life insurance or endowment contract, any gain due to interest accumulated on the contract is ordinary income. Federal amended tax return See Transfers of Annuity Contracts in Publication 575 for more information about exchanges of annuity contracts. Federal amended tax return How To Report If you file Form 1040, report your total annuity on line 16a and the taxable part on line 16b. Federal amended tax return If your pension or annuity is fully taxable, enter it on line 16b; do not make an entry on line 16a. Federal amended tax return If you file Form 1040A, report your total annuity on line 12a and the taxable part on line 12b. Federal amended tax return If your pension or annuity is fully taxable, enter it on line 12b; do not make an entry on line 12a. Federal amended tax return More than one annuity. Federal amended tax return   If you receive more than one annuity and at least one of them is not fully taxable, enter the total amount received from all annuities on Form 1040, line 16a, or Form 1040A, line 12a, and enter the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. Federal amended tax return If all the annuities you receive are fully taxable, enter the total of all of them on Form 1040, line 16b, or Form 1040A, line 12b. Federal amended tax return Joint return. Federal amended tax return   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on Form 1040, line 16a, or Form 1040A, line 12a, and report the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. Federal amended tax return Cost (Investment in the Contract) Before you can figure how much, if any, of a distribution from your pension or annuity plan is taxable, you must determine your cost (your investment in the contract) in the pension or annuity. Federal amended tax return Your total cost in the plan includes the total premiums, contributions, or other amounts you paid. Federal amended tax return This includes the amounts your employer contributed that were taxable to you when paid. Federal amended tax return Cost does not include any amounts you deducted or were excluded from your income. Federal amended tax return From this total cost, subtract any refunds of premiums, rebates, dividends, unrepaid loans that were not included in your income, or other tax-free amounts that you received by the later of the annuity starting date or the date on which you received your first payment. Federal amended tax return 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. Federal amended tax return Designated Roth accounts. Federal amended tax return   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. Federal amended tax return Your cost will also include any in-plan Roth rollovers you included in income. Federal amended tax return Foreign employment contributions. Federal amended tax return   If you worked in a foreign country and contributions were made to your retirement plan, special rules apply in determining your cost. Federal amended tax return See Foreign employment contributions under Cost (Investment in the Contract) in Publication 575. Federal amended tax return Taxation of Periodic Payments Fully taxable payments. Federal amended tax return   Generally, if you did not pay any part of the cost of your employee pension or annuity and your employer did not withhold part of the cost from your pay while you worked, the amounts you receive each year are fully taxable. Federal amended tax return You must report them on your income tax return. Federal amended tax return Partly taxable payments. Federal amended tax return   If you paid part of the cost of your pension or annuity, you are not taxed on the part of the pension or annuity you receive that represents a return of your cost. Federal amended tax return The rest of the amount you receive is generally taxable. Federal amended tax return You figure the tax-free part of the payment using either the Simplified Method or the General Rule. Federal amended tax return Your annuity starting date and whether or not your plan is qualified determine which method you must or may use. Federal amended tax return   If your annuity starting date is after November 18, 1996, and your payments are from a qualified plan, you must use the Simplified Method. Federal amended tax return Generally, you must use the General Rule if your annuity is paid under a nonqualified plan, and you cannot use this method if your annuity is paid under a qualified plan. Federal amended tax return   If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. Federal amended tax return   If your annuity is paid under a qualified plan and your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method. Federal amended tax return Exclusion limit. Federal amended tax return   Your annuity starting date determines the total amount of annuity payments that you can exclude from your taxable income over the years. Federal amended tax return Once your annuity starting date is determined, it does not change. Federal amended tax return 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. Federal amended tax return That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. Federal amended tax return Exclusion limited to cost. Federal amended tax return   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. Federal amended tax return 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. Federal amended tax return This deduction is not subject to the 2%-of-adjusted-gross-income limit. Federal amended tax return Exclusion not limited to cost. Federal amended tax return   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Federal amended tax return 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. Federal amended tax return The total exclusion may be more than your cost. Federal amended tax return 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. Federal amended tax return 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. Federal amended tax return For any other annuity, this number is the number of monthly annuity payments under the contract. Federal amended tax return Who must use the Simplified Method. Federal amended tax return   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you both: Receive pension or annuity payments from a qualified employee plan, qualified employee annuity, or a tax-sheltered annuity (403(b)) plan, and On your annuity starting date, you were either under age 75, or entitled to less than 5 years of guaranteed payments. Federal amended tax return Guaranteed payments. Federal amended tax return   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. Federal amended tax return 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. Federal amended tax return How to use the Simplified Method. Federal amended tax return    Complete the Simplified Method Worksheet in Publication 575 to figure your taxable annuity for 2013. Federal amended tax return Single-life annuity. Federal amended tax return    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. Federal amended tax return Enter on line 3 the number shown for your age at the annuity starting date. Federal amended tax return Multiple-lives annuity. Federal amended tax return   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. Federal amended tax return Enter on line 3 the number shown for the combined ages of you and the youngest survivor annuitant at the annuity starting date. Federal amended tax return   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Federal amended tax return Instead you must use Table 1 and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Federal amended tax return    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity next year. Federal amended tax return Example. Federal amended tax return Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. Federal amended tax return Bill's annuity starting date is January 1, 2013. Federal amended tax return The benefits are to be paid for the joint lives of Bill and his wife Kathy, age 65. Federal amended tax return Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Federal amended tax return 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. Federal amended tax return 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. Federal amended tax return 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 the worksheet in completing line 3 of the worksheet. Federal amended tax return His completed worksheet is shown in Worksheet 10-A. Federal amended tax return Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Federal amended tax return Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Federal amended tax return The full amount of any annuity payments received after 310 payments are paid must be included in gross income. Federal amended tax return 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. Federal amended tax return This deduction is not subject to the 2%-of-adjusted- gross-income limit. Federal amended tax return Worksheet 10-A. Federal amended tax return Simplified Method Worksheet for Bill Smith 1. Federal amended tax return Enter the total pension or annuity payments received this year. Federal amended tax return Also, add this amount to the total for Form 1040, line 16a, or Form 1040A, line 12a 1. Federal amended tax return 14,400 2. Federal amended tax return Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion*. Federal amended tax return See Cost (Investment in the Contract) , earlier 2. Federal amended tax return 31,000       Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Federal amended tax return Otherwise, go to line 3. Federal amended tax return         3. Federal amended tax return Enter the appropriate number from Table 1 below. Federal amended tax return 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. Federal amended tax return 310     4. Federal amended tax return Divide line 2 by the number on line 3 4. Federal amended tax return 100     5. Federal amended tax return Multiply line 4 by the number of months for which this year's payments were made. Federal amended tax return If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Federal amended tax return Otherwise, go to line 6 5. Federal amended tax return 1,200     6. Federal amended tax return Enter any amounts previously recovered tax free in years after 1986. Federal amended tax return This is the amount shown on line 10 of your worksheet for last year 6. Federal amended tax return -0-     7. Federal amended tax return Subtract line 6 from line 2 7. Federal amended tax return 31,000     8. Federal amended tax return Enter the smaller of line 5 or line 7 8. Federal amended tax return 1,200 9. Federal amended tax return Taxable amount for year. Federal amended tax return Subtract line 8 from line 1. Federal amended tax return Enter the result, but not less than zero. Federal amended tax return Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b 9. Federal amended tax return 13,200   Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Federal amended tax return If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers in Publication 575 before entering an amount on your tax return. Federal amended tax return     10. Federal amended tax return Was your annuity starting date before 1987? □ Yes. Federal amended tax return STOP. Federal amended tax return Do not complete the rest of this worksheet. Federal amended tax return  ☑ No. Federal amended tax return Add lines 6 and 8. Federal amended tax return This is the amount you have recovered tax free through 2013. Federal amended tax return You will need this number if you need to fill out this worksheet next year 10. Federal amended tax return 1,200 11. Federal amended tax return Balance of cost to be recovered. Federal amended tax return Subtract line 10 from line 2. Federal amended tax return If zero, you will not have to complete this worksheet next year. Federal amended tax return The payments you receive next year will generally be fully taxable 11. Federal amended tax return 29,800 TABLE 1 FOR LINE 3 ABOVE   AND your annuity starting date was— IF the age at annuity starting date was. Federal amended tax return . Federal amended tax return . Federal amended tax return before November 19, 1996, enter on line 3. Federal amended tax return . Federal amended tax return . Federal amended tax return after November 18, 1996, enter on line 3. Federal amended tax return . Federal amended tax return . Federal amended tax return 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. Federal amended tax return . Federal amended tax return . Federal amended tax return   THEN enter on line 3. Federal amended tax return . Federal amended tax return . Federal amended tax return 110 or under   410 111–120   360 121–130   310 131–140   260 141 or older   210 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Federal amended tax return Who must use the General Rule. Federal amended tax return   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. Federal amended tax return Annuity starting before November 19, 1996. Federal amended tax return   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. Federal amended tax return You also had to use it for any fixed-period annuity. Federal amended tax return If you did not have to use the General Rule, you could have chosen to use it. Federal amended tax return 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. Federal amended tax return   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. Federal amended tax return Who cannot use the General Rule. Federal amended tax return   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. Federal amended tax return See Who must use the Simplified Method , earlier. Federal amended tax return More information. Federal amended tax return   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. Federal amended tax return Taxation of Nonperiodic Payments Nonperiodic distributions are also known as amounts not received as an annuity. Federal amended tax return They include all payments other than periodic payments and corrective distributions. Federal amended tax return Examples of nonperiodic payments are cash withdrawals, distributions of current earnings, certain loans, and the value of annuity contracts transferred without full and adequate consideration. Federal amended tax return Corrective distributions of excess plan contributions. Federal amended tax return   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. Federal amended tax return To correct an excess, your plan may distribute it to you (along with any income earned on the excess). Federal amended tax return 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. Federal amended tax return Figuring the taxable amount of nonperiodic payments. Federal amended tax return   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. Federal amended tax return 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. Federal amended tax return 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. Federal amended tax return Annuity starting date. Federal amended tax return   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. Federal amended tax return Distribution on or after annuity starting date. Federal amended tax return   If you receive a nonperiodic payment from your annuity contract on or after the annuity starting date, you generally must include all of the payment in gross income. Federal amended tax return Distribution before annuity starting date. Federal amended tax return   If you receive a nonperiodic distribution before the annuity starting date from a qualified retirement plan, you generally can allocate only part of it to the cost of the contract. Federal amended tax return You exclude from your gross income the part that you allocate to the cost. Federal amended tax return You include the remainder in your gross income. Federal amended tax return   If you receive a nonperiodic distribution before the annuity starting date from a plan other than a qualified retirement plan (nonqualified plan), it is allocated first to earnings (the taxable part) and then to the cost of the contract (the tax-free part). Federal amended tax return This allocation rule applies, for example, to a commercial annuity contract you bought directly from the issuer. Federal amended tax return    Distributions from nonqualified plans are subject to the net investment income tax. Federal amended tax return See the Instructions for Form 8960. Federal amended tax return   For more information, see Figuring the Taxable Amount under Taxation of Nonperiodic Payments in Publication 575. Federal amended tax return Lump-Sum Distributions This section on lump-sum distributions only applies if the plan participant was born before January 2, 1936. Federal amended tax return If the plan participant was born after January 1, 1936, the taxable amount of this nonperiodic payment is reported as discussed earlier. Federal amended tax return A lump-sum distribution is the distribution or payment in one tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans). Federal amended tax return A distribution from a nonqualified plan (such as a privately purchased commercial annuity or a section 457 deferred compensation plan of a state or local government or tax-exempt organization) cannot qualify as a lump-sum distribution. Federal amended tax return The participant's entire balance from a plan does not include certain forfeited amounts. Federal amended tax return It also does not include any deductible voluntary employee contributions allowed by the plan after 1981 and before 1987. Federal amended tax return For more information about distributions that do not qualify as lump-sum distributions, see Distributions that do not qualify under Lump-Sum Distributions in Publication 575. Federal amended tax return If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. Federal amended tax return The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. Federal amended tax return The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. Federal amended tax return You may be able to use the 10-year tax option, discussed later, to figure tax on the ordinary income part. Federal amended tax return Use Form 4972 to figure the separate tax on a lump-sum distribution using the optional methods. Federal amended tax return The tax figured on Form 4972 is added to the regular tax figured on your other income. Federal amended tax return This may result in a smaller tax than you would pay by including the taxable amount of the distribution as ordinary income in figuring your regular tax. Federal amended tax return How to treat the distribution. Federal amended tax return   If you receive a lump-sum distribution, you may have the following options for how you treat the taxable part. Federal amended tax return Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and the part from participation after 1973 as ordinary income. Federal amended tax return Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and use the 10-year tax option to figure the tax on the part from participation after 1973 (if you qualify). Federal amended tax return Use the 10-year tax option to figure the tax on the total taxable amount (if you qualify). Federal amended tax return Roll over all or part of the distribution. Federal amended tax return See Rollovers , later. Federal amended tax return No tax is currently due on the part rolled over. Federal amended tax return Report any part not rolled over as ordinary income. Federal amended tax return Report the entire taxable part of the distribution as ordinary income on your tax return. Federal amended tax return   The first three options are explained in the following discussions. Federal amended tax return Electing optional lump-sum treatment. Federal amended tax return   You can choose to use the 10-year tax option or capital gain treatment only once after 1986 for any plan participant. Federal amended tax return If you make this choice, you cannot use either of these optional treatments for any future distributions for the participant. Federal amended tax return Taxable and tax-free parts of the distribution. Federal amended tax return    The taxable part of a lump-sum distribution is the employer's contributions and income earned on your account. Federal amended tax return You may recover your cost in the lump sum and any net unrealized appreciation (NUA) in employer securities tax free. Federal amended tax return Cost. Federal amended tax return   In general, your cost is the total of: The plan participant's nondeductible contributions to the plan, The plan participant's taxable costs of any life insurance contract distributed, Any employer contributions that were taxable to the plan participant, and Repayments of any loans that were taxable to the plan participant. Federal amended tax return You must reduce this cost by amounts previously distributed tax free. Federal amended tax return Net unrealized appreciation (NUA). Federal amended tax return   The NUA in employer securities (box 6 of Form 1099-R) received as part of a lump-sum distribution is generally tax free until you sell or exchange the securities. Federal amended tax return (For more information, see Distributions of employer securities under Taxation of Nonperiodic Payments in Publication 575. Federal amended tax return ) Capital Gain Treatment Capital gain treatment applies only to the taxable part of a lump-sum distribution resulting from participation in the plan before 1974. Federal amended tax return The amount treated as capital gain is taxed at a 20% rate. Federal amended tax return You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. Federal amended tax return Complete Part II of Form 4972 to choose the 20% capital gain election. Federal amended tax return For more information, see Capital Gain Treatment under Lump-Sum Distributions in Publication 575. Federal amended tax return 10-Year Tax Option The 10-year tax option is a special formula used to figure a separate tax on the ordinary income part of a lump-sum distribution. Federal amended tax return You pay the tax only once, for the year in which you receive the distribution, not over the next 10 years. Federal amended tax return You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. Federal amended tax return The ordinary income part of the distribution is the amount shown in box 2a of the Form 1099-R given to you by the payer, minus the amount, if any, shown in box 3. Federal amended tax return You also can treat the capital gain part of the distribution (box 3 of Form 1099-R) as ordinary income for the 10-year tax option if you do not choose capital gain treatment for that part. Federal amended tax return Complete Part III of Form 4972 to choose the 10-year tax option. Federal amended tax return You must use the special Tax Rate Schedule shown in the instructions for Part III to figure the tax. Federal amended tax return Publication 575 illustrates how to complete Form 4972 to figure the separate tax. Federal amended tax return Rollovers If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can defer tax on the distribution by rolling it over to another qualified retirement plan or a traditional IRA. Federal amended tax return For this purpose, the following plans are qualified retirement plans. Federal amended tax return A qualified employee plan. Federal amended tax return A qualified employee annuity. Federal amended tax return A tax-sheltered annuity plan (403(b) plan). Federal amended tax return An eligible state or local government section 457 deferred compensation plan. Federal amended tax return Eligible rollover distributions. Federal amended tax return   Generally, an eligible rollover distribution is any distribution of all or any part of the balance to your credit in a qualified retirement plan. Federal amended tax return For information about exceptions to eligible rollover distributions, see Publication 575. Federal amended tax return Rollover of nontaxable amounts. Federal amended tax return   You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another qualified retirement plan that is a qualified employee plan or a 403(b) plan, or to a traditional or Roth IRA. Federal amended tax return The transfer must be made either through a direct rollover to a qualified plan or 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional or Roth IRA. Federal amended tax return   If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. Federal amended tax return   Any after-tax contributions that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. Federal amended tax return To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. Federal amended tax return For more information, see the Form 8606 instructions. Federal amended tax return Direct rollover option. Federal amended tax return   You can choose to have any part or all of an eligible rollover distribution paid directly to another qualified retirement plan that accepts rollover distributions or to a traditional or Roth IRA. Federal amended tax return If you choose the direct rollover option, or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. Federal amended tax return Payment to you option. Federal amended tax return   If an eligible rollover distribution is paid to you, 20% generally will be withheld for income tax. Federal amended tax return However, the full amount is treated as distributed to you even though you actually receive only 80%. Federal amended tax return You generally must include in income any part (including the part withheld) that you do not roll over within 60 days to another qualified retirement plan or to a traditional or Roth IRA. Federal amended tax return (See Pensions and Annuities under Tax Withholding for 2014 in chapter 4. Federal amended tax return )    If you decide to roll over an amount equal to the distribution before withholding, your contribution to the new plan or IRA must include other money (for example, from savings or amounts borrowed) to replace the amount withheld. Federal amended tax return Time for making rollover. Federal amended tax return   You generally must complete the rollover of an eligible rollover distribution paid to you by the 60th day following the day on which you receive the distribution from your employer's plan. Federal amended tax return (If an amount distributed to you becomes a frozen deposit in a financial institution during the 60-day period after you receive it, the rollover period is extended for the period during which the distribution is in a frozen deposit in a financial institution. Federal amended tax return )   The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. Federal amended tax return   The administrator of a qualified plan must give you a written explanation of your distribution options within a reasonable period of time before making an eligible rollover distribution. Federal amended tax return Qualified domestic relations order (QDRO). Federal amended tax return   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan that you receive under a QDRO. Federal amended tax return If you receive the distribution as an employee's spouse or former spouse (not as a nonspousal beneficiary), the rollover rules apply to you as if you were the employee. Federal amended tax return You can roll over the distribution from the plan into a traditional IRA or to another eligible retirement plan. Federal amended tax return See Rollovers in Publication 575 for more information on benefits received under a QDRO. Federal amended tax return Rollover by surviving spouse. Federal amended tax return   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan you receive as the surviving spouse of a deceased employee. Federal amended tax return The rollover rules apply to you as if you were the employee. Federal amended tax return You can roll over a distribution into a qualified retirement plan or a traditional or Roth IRA. Federal amended tax return For a rollover to a Roth IRA, see Rollovers to Roth IRAs , later. Federal amended tax return    A distribution paid to a beneficiary other than the employee's surviving spouse is generally not an eligible rollover distribution. Federal amended tax return However, see Rollovers by nonspouse beneficiary next. Federal amended tax return Rollovers by nonspouse beneficiary. Federal amended tax return   If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you may be able to roll over tax free all or a portion of a distribution you receive from an eligible retirement plan of the employee. Federal amended tax return The distribution must be a direct trustee-to-trustee transfer to your traditional or Roth IRA that was set up to receive the distribution. Federal amended tax return The transfer will be treated as an eligible rollover distribution and the receiving plan will be treated as an inherited IRA. Federal amended tax return For information on inherited IRAs, see What if You Inherit an IRA? in chapter 1 of Publication 590, Individual Retirement Arrangements (IRAs). Federal amended tax return Retirement bonds. Federal amended tax return   If you redeem retirement bonds purchased under a qualified bond purchase plan, you can roll over the proceeds that exceed your basis tax free into an IRA (as discussed in Publication 590) or a qualified employer plan. Federal amended tax return Designated Roth accounts. Federal amended tax return   You can roll over an eligible rollover distribution from a designated Roth account into another designated Roth account or a Roth IRA. Federal amended tax return If you want to roll over the part of the distribution that is not included in income, you must make a direct rollover of the entire distribution or you can roll over the entire amount (or any portion) to a Roth IRA. Federal amended tax return For more information on rollovers from designated Roth accounts, see Rollovers in Publication 575. Federal amended tax return In-plan rollovers to designated Roth accounts. Federal amended tax return   If you are a plan participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. Federal amended tax return The rollover of any untaxed amounts must be included in income. Federal amended tax return See Designated Roth accounts under Rollovers in Publication 575 for more information. Federal amended tax return Rollovers to Roth IRAs. Federal amended tax return   You can roll over distributions directly from a qualified retirement plan (other than a designated Roth account) to a Roth IRA. Federal amended tax return   You must include in your gross income distributions from a qualified retirement plan (other than a designated Roth account) that you would have had to include in income if you had not rolled them over into a Roth IRA. Federal amended tax return You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions to the plan that were taxable to you when paid. Federal amended tax return In addition, the 10% tax on early distributions does not apply. Federal amended tax return More information. Federal amended tax return   For more information on the rules for rolling over distributions, see Rollovers in Publication 575. Federal amended tax return Special Additional Taxes To discourage the use of pension funds for purposes other than normal retirement, the law imposes additional taxes on early distributions of those funds and on failures to withdraw the funds timely. Federal amended tax return Ordinarily, you will not be subject to these taxes if you roll over all early distributions you receive, as explained earlier, and begin drawing out the funds at a normal retirement age, in reasonable amounts over your life expectancy. Federal amended tax return These special additional taxes are the taxes on: Early distributions, and Excess accumulation (not receiving minimum distributions). Federal amended tax return These taxes are discussed in the following sections. Federal amended tax return If you must pay either of these taxes, report them on Form 5329. Federal amended tax return However, you do not have to file Form 5329 if you owe only the tax on early distributions and your Form 1099-R correctly shows a “1” in box 7. Federal amended tax return Instead, enter 10% of the taxable part of the distribution on Form 1040, line 58 and write “No” under the heading “Other Taxes” to the left of line 58. Federal amended tax return Even if you do not owe any of these taxes, you may have to complete Form 5329 and attach it to your Form 1040. Federal amended tax return This applies if you meet an exception to the tax on early distributions but box 7 of your Form 1099-R does not indicate an exception. Federal amended tax return Tax on Early Distributions Most distributions (both periodic and nonperiodic) from qualified retirement plans and nonqualified annuity contracts made to you before you reach age 59½ are subject to an additional tax of 10%. Federal amended tax return This tax applies to the part of the distribution that you must include in gross income. Federal amended tax return For this purpose, a qualified retirement plan is: A qualified employee plan, A qualified employee annuity plan, A tax-sheltered annuity plan, or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). Federal amended tax return 5% rate on certain early distributions from deferred annuity contracts. Federal amended tax return   If an early withdrawal from a deferred annuity is otherwise subject to the 10% additional tax, a 5% rate may apply instead. Federal amended tax return A 5% rate applies to distributions under a written election providing a specific schedule for the distribution of your interest in the contract if, as of March 1, 1986, you had begun receiving payments under the election. Federal amended tax return On line 4 of Form 5329, multiply the line 3 amount by 5% instead of 10%. Federal amended tax return Attach an explanation to your return. Federal amended tax return Distributions from Roth IRAs allocable to a rollover from an eligible retirement plan within the 5-year period. Federal amended tax return   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from an eligible retirement plan to a Roth IRA, you take a distribution from the Roth IRA, you may have to pay the additional 10% tax on early distributions. Federal amended tax return You generally must pay the 10% additional tax on any amount attributable to the part of the rollover that you had to include in income. Federal amended tax return The additional tax is figured on Form 5329. Federal amended tax return For more information, see Form 5329 and its instructions. Federal amended tax return For information on qualified distributions from Roth IRAs, see Additional Tax on Early Distributions in chapter 2 of Publication 590. Federal amended tax return Distributions from designated Roth accounts allocable to in-plan Roth rollovers within the 5-year period. Federal amended tax return   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from a 401(k), 403(b), or 457(b) plan to a designated Roth account, you take a distribution from the designated Roth account, you may have to pay the additional 10% tax on early distributions. Federal amended tax return You generally must pay the 10% additional tax on any amount attributable to the part of the in-plan rollover that you had to include in income. Federal amended tax return The additional tax is figured on Form 5329. Federal amended tax return For more information, see Form 5329 and its instructions. Federal amended tax return For information on qualified distributions from designated Roth accounts, see Designated Roth accounts under Taxation of Periodic Payments in Publication 575. Federal amended tax return Exceptions to tax. Federal amended tax return    Certain early distributions are excepted from the early distribution tax. Federal amended tax return If the payer knows that an exception applies to your early distribution, distribution code “2,” “3,” or “4” should be shown in box 7 of your Form 1099-R and you do not have to report the distribution on Form 5329. Federal amended tax return If an exception applies but distribution code “1” (early distribution, no known exception) is shown in box 7, you must file Form 5329. Federal amended tax return Enter the taxable amount of the distribution shown in box 2a of your Form 1099-R on line 1 of Form 5329. Federal amended tax return On line 2, enter the amount that can be excluded and the exception number shown in the Form 5329 instructions. Federal amended tax return    If distribution code “1” is incorrectly shown on your Form 1099-R for a distribution received when you were age 59½ or older, include that distribution on Form 5329. Federal amended tax return Enter exception number “12” on line 2. Federal amended tax return General exceptions. Federal amended tax return   The tax does not apply to distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after your separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. Federal amended tax return Additional exceptions for qualified retirement plans. Federal amended tax return   The tax does not apply to distributions that are: From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees), From a qualified retirement plan (other than an IRA) to an alternate payee under a qualified domestic relations order, From a qualified retirement plan to the extent you have deductible medical expenses that exceed 10% (or 7. Federal amended tax return 5% if you or your spouse are age 65 or older) of your adjusted gross income, whether or not you itemize your deductions for the year, From an employer plan under a written election that provides a specific schedule for distribution of your entire interest if, as of March 1, 1986, you had separated from service and had begun receiving payments under the election, From an employee stock ownership plan for dividends on employer securities held by the plan, From a qualified retirement plan due to an IRS levy of the plan, From elective deferral accounts under 401(k) or 403(b) plans or similar arrangements that are qualified reservist distributions, or Phased retirement annuity payments made to federal employees. Federal amended tax return See Pub. Federal amended tax return 721 for more information on the phased retirement program. Federal amended tax return Qualified public safety employees. Federal amended tax return   If you are a qualified public safety employee, distributions made from a governmental defined benefit pension plan are not subject to the additional tax on early distributions. Federal amended tax return You are a qualified public safety employee if you provide police protection, firefighting services, or emergency medical services for a state or municipality, and you separated from service in or after the year you attained age 50. Federal amended tax return Qualified reservist distributions. Federal amended tax return   A qualified reservist distribution is not subject to the additional tax on early distributions. Federal amended tax return A qualified reservist distribution is a distribution (a) from elective deferrals under a section 401(k) or 403(b) plan, or a similar arrangement, (b) to an individual ordered or called to active duty (because he or she is a member of a reserve component) for a period of more than 179 days or for an indefinite period, and (c) made during the period beginning on the date of the order or call and ending at the close of the active duty period. Federal amended tax return You must have been ordered or called to active duty after September 11, 2001. Federal amended tax return For more information, see Qualified reservist distributions under Special Additional Taxes in Publication 575. Federal amended tax return Additional exceptions for nonqualified annuity contracts. Federal amended tax return   The tax does not apply to distributions from: A deferred annuity contract to the extent allocable to investment in the contract before August 14, 1982, A deferred annuity contract under a qualified personal injury settlement, A deferred annuity contract purchased by your employer upon termination of a qualified employee plan or qualified employee annuity plan and held by your employer until your separation from service, or An immediate annuity contract (a single premium contract providing substantially equal annuity payments that start within 1 year from the date of purchase and are paid at least annually). Federal amended tax return Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date (defined later). Federal amended tax return The payments each year cannot be less than the required minimum distribution. Federal amended tax return Required distributions not made. Federal amended tax return   If the actual distributions to you in any year are less than the minimum required distribution for that year, you are subject to an additional tax. Federal amended tax return The tax equals 50% of the part of the required minimum distribution that was not distributed. Federal amended tax return   For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan)(for benefits accruing after 1986). Federal amended tax return Waiver. Federal amended tax return   The tax may be waived if you establish that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. Federal amended tax return See the Instructions for Form 5329 for the procedure to follow if you believe you qualify for a waiver of this tax. Federal amended tax return State insurer delinquency proceedings. Federal amended tax return   You might not receive the minimum distribution because assets are invested in a contract issued by an insurance company in state insurer delinquency proceedings. Federal amended tax return If your payments are reduced below the minimum due to these proceedings, you should contact your plan administrator. Federal amended tax return Under certain conditions, you will not have to pay the 50% excise tax. Federal amended tax return Required beginning date. Federal amended tax return   Unless the rule for 5% owners applies, you generally must begin to receive distributions from your qualified retirement plan by April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. Federal amended tax return However, your plan may require you to begin to receive distributions by April 1 of the year that follows the year in which you reach age 70½, even if you have not retired. Federal amended tax return   If you reached age 70½ in 2013, you may be required to receive your first distribution by April 1, 2014. Federal amended tax return Your required distribution then must be made for 2014 by December 31, 2014. Federal amended tax return 5% owners. Federal amended tax return   If you are a 5% owner, you must begin to receive distributions by April 1 of the year that follows the calendar year in which you reach age 70½. Federal amended tax return   You are a 5% owner if, for the plan year ending in the calendar year in which you reach age 70½, you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the outstanding stock (or more than 5% of the total voting power of all stock) of the employer, or more than 5% of the capital or profits interest in the employer. Federal amended tax return Age 70½. Federal amended tax return   You reach age 70½ on the date that is 6 calendar months after the date of your 70th birthday. Federal amended tax return   For example, if you are retired and your 70th birthday was on June 30, 2013, you were age 70½ on December 30, 2013. Federal amended tax return If your 70th birthday was on July 1, 2013, you reached age 70½ on January 1, 2014. Federal amended tax return Required distributions. Federal amended tax return   By the required beginning date, as explained earlier, you must either: Receive your entire interest in the plan (for a tax-sheltered annuity, your entire benefit accruing after 1986), or Begin receiving periodic distributions in annual amounts calculated to distribute your entire interest (for a tax-sheltered annuity, your entire benefit accruing after 1986) over your life or life expectancy or over the joint lives or joint life expectancies of you and a designated beneficiary (or over a shorter period). Federal amended tax return Additional information. Federal amended tax return   For more information on this rule, see Tax on Excess Accumulation in Publication 575. Federal amended tax return Form 5329. Federal amended tax return   You must file Form 5329 if you owe tax because you did not receive a minimum required distribution from your qualified retirement plan. Federal amended tax return Survivors and Beneficiaries Generally, a survivor or beneficiary reports pension or annuity income in the same way the plan participant would have. Federal amended tax return However, some special rules apply. Federal amended tax return See Publication 575 for more information. Federal amended tax return Survivors of employees. Federal amended tax return   If you are entitled to receive a survivor annuity on the death of an employee who died, you can exclude part of each annuity payment as a tax-free recovery of the employee's investment in the contract. Federal amended tax return You must figure the taxable and tax-free parts of your annuity payments using the method that applies as if you were the employee. Federal amended tax return Survivors of retirees. Federal amended tax return   If you receive benefits as a survivor under a joint and survivor annuity, include those benefits in income in the same way the retiree would have included them in income. Federal amended tax return If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule and recovered all of the cost tax free, your survivor payments are fully taxable. Federal amended tax return    If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage to your initial survivor annuity payment called for in the contract. Federal amended tax return The resulting tax-free amount will then remain fixed. Federal amended tax return Any increases in the survivor annuity are fully taxable. Federal amended tax return    If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. Federal amended tax return This amount remains fixed even if the annuity payments are increased or decreased. Federal amended tax return See Simplified Method , earlier. Federal amended tax return   In any case, if the annuity starting date is after 1986, the total exclusion over the years cannot be more than the cost. Federal amended tax return Estate tax deduction. Federal amended tax return   If your annuity was a joint and survivor annuity that was included in the decedent's estate, an estate tax may have been paid on it. Federal amended tax return You can deduct the part of the total estate tax that was based on the annuity. Federal amended tax return The deceased annuitant must have died after the annuity starting date. Federal amended tax return (For details, see section 1. Federal amended tax return 691(d)-1 of the regulations. Federal amended tax return ) Deduct it in equal amounts over your remaining life expectancy. Federal amended tax return   If the decedent died before the annuity starting date of a deferred annuity contract and you receive a death benefit under that contract, the amount you receive (either in a lump sum or as periodic payments) in excess of the decedent's cost is included in your gross income as income in respect of a decedent for which you may be able to claim an estate tax deduction. Federal amended tax return   You can take the estate tax deduction as an itemized deduction on Schedule A, Form 1040. Federal amended tax return This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. Federal amended tax return See Publication 559, Survivors, Executors, and Administrators, for more information on the estate tax deduction. Federal amended tax return Prev  Up  Next   Home   More Online Publications