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H and r block login 2. H and r block login   Source of Income Table of Contents Introduction Topics - This chapter discusses: Resident Aliens Nonresident AliensInterest Income Dividends Guarantee of Indebtedness Personal Services Transportation Income Scholarships, Grants, Prizes, and Awards Pensions and Annuities Rents or Royalties Real Property Personal Property Community Income Introduction After you have determined your alien status, you must determine the source of your income. H and r block login This chapter will help you determine the source of different types of income you may receive during the tax year. H and r block login This chapter also discusses special rules for married individuals who are domiciled in a country with community property laws. H and r block login Topics - This chapter discusses: Income source rules, and Community income. H and r block login Resident Aliens A resident alien's income is generally subject to tax in the same manner as a U. H and r block login S. H and r block login citizen. H and r block login If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U. H and r block login S. H and r block login tax return. H and r block login You must report these amounts from sources within and outside the United States. H and r block login Nonresident Aliens A nonresident alien usually is subject to U. H and r block login S. H and r block login income tax only on U. H and r block login S. H and r block login source income. H and r block login Under limited circumstances, certain foreign source income is subject to U. H and r block login S. H and r block login tax. H and r block login See Foreign Income in chapter 4. H and r block login The general rules for determining U. H and r block login S. H and r block login source income that apply to most nonresident aliens are shown in Table 2-1. H and r block login The following discussions cover the general rules as well as the exceptions to these rules. H and r block login Not all items of U. H and r block login S. H and r block login source income are taxable. H and r block login See chapter 3. H and r block login Interest Income Generally, U. H and r block login S. H and r block login source interest income includes the following items. H and r block login Interest on bonds, notes, or other interest-bearing obligations of U. H and r block login S. H and r block login residents or domestic corporations. H and r block login Interest paid by a domestic or foreign partnership or foreign corporation engaged in a U. H and r block login S. H and r block login trade or business at any time during the tax year. H and r block login Original issue discount. H and r block login Interest from a state, the District of Columbia, or the U. H and r block login S. H and r block login Government. H and r block login The place or manner of payment is immaterial in determining the source of the income. H and r block login A substitute interest payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as the interest on the transferred security. H and r block login Exceptions. H and r block login   U. H and r block login S. H and r block login source interest income does not include the following items. H and r block login Interest paid by a resident alien or a domestic corporation on obligations issued before August 10, 2010, if for the 3-year period ending with the close of the payer's tax year preceding the interest payment, at least 80% of the payer's total gross income: Is from sources outside the United States, and Is attributable to the active conduct of a trade or business by the individual or corporation in a foreign country or a U. H and r block login S. H and r block login possession. H and r block login However, the interest will be considered U. H and r block login S. H and r block login source interest income if either of the following apply. H and r block login The recipient of the interest is related to the resident alien or domestic corporation. H and r block login See section 954(d)(3) for the definition of related person. H and r block login The terms of the obligation are significantly modified after August 9, 2010. H and r block login Any extension of the term of the obligation is considered a significant modification. H and r block login Interest paid by a foreign branch of a domestic corporation or a domestic partnership on deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law if the interest paid or credited can be deducted by the association. H and r block login Interest on deposits with a foreign branch of a domestic corporation or domestic partnership, but only if the branch is in the commercial banking business. H and r block login Dividends In most cases, dividend income received from domestic corporations is U. H and r block login S. H and r block login source income. H and r block login Dividend income from foreign corporations is usually foreign source income. H and r block login Exceptions to both of these rules are discussed below. H and r block login A substitute dividend payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as a distribution on the transferred security. H and r block login Dividend equivalent payments. H and r block login   U. H and r block login S. H and r block login source dividends also include all dividend equivalent payments. H and r block login Dividend equivalent payments include substitute dividends, payments made pursuant to a specified notional principal contract, and all similar payments that, directly or indirectly, are contingent on or determined by reference to, the payment of a dividend from U. H and r block login S. H and r block login sources. H and r block login    The Internal Revenue Service has issued final regulations that would affect the treatment of dividend equivalent payments and specified notional principal contracts. H and r block login You can view this regulation at www. H and r block login irs. H and r block login gov/irb/2013-52_IRB/ar08. H and r block login html. H and r block login First exception. H and r block login   Dividends received from a domestic corporation are not U. H and r block login S. H and r block login source income if the corporation elects to take the American Samoa economic development credit. H and r block login Second exception. H and r block login   Part of the dividends received from a foreign corporation is U. H and r block login S. H and r block login source income if 25% or more of its total gross income for the 3-year period ending with the close of its tax year preceding the declaration of dividends was effectively connected with a trade or business in the United States. H and r block login If the corporation was formed less than 3 years before the declaration, use its total gross income from the time it was formed. H and r block login Determine the part that is U. H and r block login S. H and r block login source income by multiplying the dividend by the following fraction. H and r block login   Foreign corporation's gross income connected with a U. H and r block login S. H and r block login trade or business for the 3-year period     Foreign corporation's gross income from all sources for that period   Guarantee of Indebtedness Certain amounts received directly or indirectly, for the provision of a guarantee of indebtedness issued after September 27, 2010, are U. H and r block login S. H and r block login source income. H and r block login They must be paid by a noncorporate resident or U. H and r block login S. H and r block login corporation or by any foreign person if the amounts are effectively connected with the conduct of a U. H and r block login S. H and r block login trade or business. H and r block login For more information, see Internal Revenue Code sections 861(a)(9) and 862(a)(9). H and r block login Personal Services All wages and any other compensation for services performed in the United States are considered to be from sources in the United States. H and r block login The only exceptions to this rule are discussed in chapter 3 under Employees of foreign persons, organizations, or offices, and under Crew members. H and r block login If you are an employee and receive compensation for labor or personal services performed both inside and outside the United States, special rules apply in determining the source of the compensation. H and r block login Compensation (other than certain fringe benefits) is sourced on a time basis. H and r block login Certain fringe benefits (such as housing and education) are sourced on a geographical basis. H and r block login Or, you may be permitted to use an alternative basis to determine the source of compensation. H and r block login See Alternative Basis , later. H and r block login Multi-level marketing. H and r block login   Certain companies sell products through a multi-level marketing arrangement, such that an upper-tier distributor, who has sponsored a lower-tier distributor, is entitled to a payment from the company based on certain activities of that lower-tier distributor. H and r block login Generally, depending on the facts, payments from such multi-level marketing companies to independent (non-employee) distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have sponsored (lower-tier distributors) constitute income for the performance of personal services in recruiting, training, and supporting the lower-tier distributors. H and r block login The source of such income is generally based on where the services of the upper-tier distributor are performed, and may, depending on the facts, be considered multi-year compensation, with the source of income determined over the period to which such compensation is attributable. H and r block login Self-employed individuals. H and r block login   If you are self-employed, you determine the source of compensation for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. H and r block login In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. H and r block login Time Basis Use a time basis to figure your U. H and r block login S. H and r block login source compensation (other than the fringe benefits discussed later). H and r block login Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed services in the United States during the year     Total number of days you performed services during the year   You can use a unit of time less than a day in the above fraction, if appropriate. H and r block login The time period for which the compensation is made does not have to be a year. H and r block login Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. H and r block login Example 1. H and r block login Christina Brooks, a resident of the Netherlands, worked 240 days for a U. H and r block login S. H and r block login company during the tax year. H and r block login She received $80,000 in compensation. H and r block login None of it was for fringe benefits. H and r block login Christina performed services in the United States for 60 days and performed services in the Netherlands for 180 days. H and r block login Using the time basis for determining the source of compensation, $20,000 ($80,000 × 60/240) is her U. H and r block login S. H and r block login source income. H and r block login Example 2. H and r block login Rob Waters, a resident of South Africa, is employed by a corporation. H and r block login His annual salary is $100,000. H and r block login None of it is for fringe benefits. H and r block login During the first quarter of the year he worked entirely within the United States. H and r block login On April 1, Rob was transferred to Singapore for the remainder of the year. H and r block login Rob is able to establish that the first quarter of the year and the last 3 quarters of the year are two separate, distinct, and continuous periods of time. H and r block login Accordingly, $25,000 of Rob's annual salary is attributable to the first quarter of the year (. H and r block login 25 × $100,000). H and r block login All of it is U. H and r block login S. H and r block login source income because he worked entirely within the United States during that quarter. H and r block login The remaining $75,000 is attributable to the last three quarters of the year. H and r block login During those quarters, he worked 150 days in Singapore and 30 days in the United States. H and r block login His periodic performance of services in the United States did not result in distinct, separate, and continuous periods of time. H and r block login Of this $75,000, $12,500 ($75,000 × 30/180) is U. H and r block login S. H and r block login source income. H and r block login Multi-year compensation. H and r block login   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. H and r block login Multi-year compensation is compensation that is included in your income in one tax year but that is attributable to a period that includes two or more tax years. H and r block login   You determine the period to which the compensation is attributable based on the facts and circumstances of your case. H and r block login For example, an amount of compensation that specifically relates to a period of time that includes several calendar years is attributable to the entire multi-year period. H and r block login   The amount of compensation treated as from U. H and r block login S. H and r block login sources is figured by multiplying the total multi-year compensation by a fraction. H and r block login The numerator of the fraction is the number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in the United States in connection with the project. H and r block login The denominator of the fraction is the total number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in connection with the project. H and r block login Geographical Basis Compensation you receive as an employee in the form of the following fringe benefits is sourced on a geographical basis. H and r block login Housing. H and r block login Education. H and r block login Local transportation. H and r block login Tax reimbursement. H and r block login Hazardous or hardship duty pay as defined in Regulations section 1. H and r block login 861-4(b)(2)(ii)(D)(5). H and r block login Moving expense reimbursement. H and r block login The amount of fringe benefits must be reasonable and you must substantiate them by adequate records or by sufficient evidence. H and r block login Principal place of work. H and r block login   The above fringe benefits, except for tax reimbursement and hazardous or hardship duty pay, are sourced based on your principal place of work. H and r block login Your principal place of work is usually the place where you spend most of your working time. H and r block login This could be your office, plant, store, shop, or other location. H and r block login If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work. H and r block login   If you have more than one job at any time, your main job location depends on the facts in each case. H and r block login The more important factors to be considered are: The total time you spend at each place, The amount of work you do at each place, and How much money you earn at each place. H and r block login Housing. H and r block login   The source of a housing fringe benefit is determined based on the location of your principal place of work. H and r block login A housing fringe benefit includes payments to you or on your behalf (and your family's if your family resides with you) only for the following. H and r block login Rent. H and r block login Utilities (except telephone charges). H and r block login Real and personal property insurance. H and r block login Occupancy taxes not deductible under section 164 or 216(a). H and r block login Nonrefundable fees for securing a leasehold. H and r block login Rental of furniture and accessories. H and r block login Household repairs. H and r block login Residential parking. H and r block login Fair rental value of housing provided in kind by your employer. H and r block login   A housing fringe benefit does not include: Deductible interest and taxes (including deductible interest and taxes of a tenant-stockholder in a cooperative housing corporation), The cost of buying property, including principal payments on a mortgage, The cost of domestic labor (maids, gardeners, etc. H and r block login ), Pay television subscriptions, Improvements and other expenses that increase the value or appreciably prolong the life of property, Purchased furniture or accessories, Depreciation or amortization of property or improvements, The value of meals or lodging that you exclude from gross income, or The value of meals or lodging that you deduct as moving expenses. H and r block login Education. H and r block login   The source of an education fringe benefit for the education expenses of your dependents is determined based on the location of your principal place of work. H and r block login An education fringe benefit includes payments only for the following expenses for education at an elementary or secondary school. H and r block login Tuition, fees, academic tutoring, special needs services for a special needs student, books, supplies, and other equipment. H and r block login Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance. H and r block login Local transportation. H and r block login   The source of a local transportation fringe benefit is determined based on the location of your principal place of work. H and r block login Your local transportation fringe benefit is the amount that you receive as compensation for local transportation for you or your spouse or dependents at the location of your principal place of work. H and r block login The amount treated as a local transportation fringe benefit is limited to actual expenses incurred for local transportation and the fair rental value of any employer-provided vehicle used predominantly by you, your spouse, or your dependents for local transportation. H and r block login Actual expenses do not include the cost (including interest) of any vehicle purchased by you or on your behalf. H and r block login Tax reimbursement. H and r block login   The source of a tax reimbursement fringe benefit is determined based on the location of the jurisdiction that imposed the tax for which you are reimbursed. H and r block login Moving expense reimbursement. H and r block login   The source of a moving expense reimbursement is generally based on the location of your new principal place of work. H and r block login However, the source is determined based on the location of your former principal place of work if you provide sufficient evidence that such determination of source is more appropriate under the facts and circumstances of your case. H and r block login Sufficient evidence generally requires an agreement between you and your employer, or a written statement of company policy, which is reduced to writing before the move and which is entered into or established to induce you or other employees to move to another country. H and r block login The written statement or agreement must state that your employer will reimburse you for moving expenses that you incur to return to your former principal place of work regardless of whether you continue to work for your employer after returning to that location. H and r block login It may contain certain conditions upon which the right to reimbursement is determined as long as those conditions set forth standards that are definitely ascertainable and can only be fulfilled prior to, or through completion of, your return move to your former principal place of work. H and r block login Alternative Basis If you are an employee, you can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your compensation than the time or geographical basis. H and r block login If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your compensation. H and r block login Also, if your total compensation from all sources is $250,000 or more, check “Yes” to both questions on line K on page 5 of Form 1040NR, and attach a written statement to your tax return that sets forth all of the following. H and r block login Your name and social security number (written across the top of the statement). H and r block login The specific compensation income, or the specific fringe benefit, for which you are using the alternative basis. H and r block login For each item in (2), the alternative basis of allocation of source used. H and r block login For each item in (2), a computation showing how the alternative allocation was computed. H and r block login A comparison of the dollar amount of the U. H and r block login S. H and r block login compensation and foreign compensation sourced under both the alternative basis and the time or geographical basis discussed earlier. H and r block login Transportation Income Transportation income is income from the use of a vessel or aircraft or for the performance of services directly related to the use of any vessel or aircraft. H and r block login This is true whether the vessel or aircraft is owned, hired, or leased. H and r block login The term “vessel or aircraft” includes any container used in connection with a vessel or aircraft. H and r block login All income from transportation that begins and ends in the United States is treated as derived from sources in the United States. H and r block login If the transportation begins or ends in the United States, 50% of the transportation income is treated as derived from sources in the United States. H and r block login For transportation income from personal services, 50% of the income is U. H and r block login S. H and r block login source income if the transportation is between the United States and a U. H and r block login S. H and r block login possession. H and r block login For nonresident aliens, this only applies to income derived from, or in connection with, an aircraft. H and r block login For information on how U. H and r block login S. H and r block login source transportation income is taxed, see chapter 4. H and r block login Scholarships, Grants, Prizes, and Awards Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. H and r block login However, see Activities to be performed outside the United States , later. H and r block login For example, payments for research or study in the United States made by the United States, a noncorporate U. H and r block login S. H and r block login resident, or a domestic corporation, are from U. H and r block login S. H and r block login sources. H and r block login Similar payments from a foreign government or foreign corporation are foreign source payments even though the funds may be disbursed through a U. H and r block login S. H and r block login agent. H and r block login Payments made by an entity designated as a public international organization under the International Organizations Immunities Act are from foreign sources. H and r block login Activities to be performed outside the United States. H and r block login   Scholarships, fellowship grants, targeted grants, and achievement awards received by nonresident aliens for activities performed, or to be performed, outside the United States are not U. H and r block login S. H and r block login source income. H and r block login    These rules do not apply to amounts paid as salary or other compensation for services. H and r block login See Personal Services, earlier, for the source rules that apply. H and r block login Pensions and Annuities If you receive a pension from a domestic trust for services performed both in and outside the United States, part of the pension payment is from U. H and r block login S. H and r block login sources. H and r block login That part is the amount attributable to earnings of the pension plan and the employer contributions made for services performed in the United States. H and r block login This applies whether the distribution is made under a qualified or nonqualified stock bonus, pension, profit-sharing, or annuity plan (whether or not funded). H and r block login If you performed services as an employee of the United States, you may receive a distribution from the U. H and r block login S. H and r block login Government under a plan, such as the Civil Service Retirement System, that is treated as a qualified pension plan. H and r block login Your U. H and r block login S. H and r block login source income is the otherwise taxable amount of the distribution that is attributable to your total U. H and r block login S. H and r block login Government basic pay other than tax-exempt pay for services performed outside the United States. H and r block login Rents or Royalties Your U. H and r block login S. H and r block login source income includes rent and royalty income received during the tax year from property located in the United States or from any interest in that property. H and r block login U. H and r block login S. H and r block login source income also includes rents or royalties for the use of, or for the privilege of using, in the United States, intangible property such as patents, copyrights, secret processes and formulas, goodwill, trademarks, franchises, and similar property. H and r block login Real Property Real property is land and buildings and generally anything built on, growing on, or attached to land. H and r block login Gross income from sources in the United States includes gains, profits, and income from the sale or other disposition of real property located in the United States. H and r block login Natural resources. H and r block login   The income from the sale of products of any farm, mine, oil or gas well, other natural deposit, or timber located in the United States and sold in a foreign country, or located in a foreign country and sold in the United States, is partly from sources in the United States. H and r block login For information on determining that part, see section 1. H and r block login 863-1(b) of the regulations. H and r block login Table 2-1. H and r block login Summary of Source Rules for Income of Nonresident Aliens Item of income Factor determining source Salaries, wages, other compensation Where services performed Business income:   Personal services Where services performed Sale of inventory—purchased Where sold Sale of inventory—produced Allocation Interest Residence of payer Dividends Whether a U. H and r block login S. H and r block login or foreign corporation* Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. H and r block login Where property is used Sale of real property Location of property Sale of personal property Seller's tax home (but see Personal Property , later, for exceptions) Pension distributions attributable to contributions Where services were performed that earned the pension Investment earnings on pension contributions Location of pension trust Sale of natural resources Allocation based on fair market value of product at export terminal. H and r block login For more information, see section 1. H and r block login 863-1(b) of the regulations. H and r block login *Exceptions include: a) Dividends paid by a U. H and r block login S. H and r block login corporation are foreign source if the corporation elects the  American Samoa economic development credit. H and r block login  b) Part of a dividend paid by a foreign corporation is U. H and r block login S. H and r block login source if at least 25% of the  corporation's gross income is effectively connected with a U. H and r block login S. H and r block login trade or business for the  3 tax years before the year in which the dividends are declared. H and r block login Personal Property Personal property is property, such as machinery, equipment, or furniture, that is not real property. H and r block login Gain or loss from the sale or exchange of personal property generally has its source in the United States if you have a tax home in the United States. H and r block login If you do not have a tax home in the United States, the gain or loss generally is considered to be from sources outside the United States. H and r block login Tax home. H and r block login   Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. H and r block login Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. H and r block login If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. H and r block login If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. H and r block login Inventory property. H and r block login   Inventory property is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. H and r block login Income from the sale of inventory that you purchased is sourced where the property is sold. H and r block login Generally, this is where title to the property passes to the buyer. H and r block login For example, income from the sale of inventory in the United States is U. H and r block login S. H and r block login source income, whether you purchased it in the United States or in a foreign country. H and r block login   Income from the sale of inventory property that you produced in the United States and sold outside the United States (or vice versa) is partly from sources in the United States and partly from sources outside the United States. H and r block login For information on making this allocation, see section 1. H and r block login 863-3 of the regulations. H and r block login   These rules apply even if your tax home is not in the United States. H and r block login Depreciable property. H and r block login   To determine the source of any gain from the sale of depreciable personal property, you must first figure the part of the gain that is not more than the total depreciation adjustments on the property. H and r block login You allocate this part of the gain to sources in the United States based on the ratio of U. H and r block login S. H and r block login depreciation adjustments to total depreciation adjustments. H and r block login The rest of this part of the gain is considered to be from sources outside the United States. H and r block login   For this purpose, “U. H and r block login S. H and r block login depreciation adjustments” are the depreciation adjustments to the basis of the property that are allowable in figuring taxable income from U. H and r block login S. H and r block login sources. H and r block login However, if the property is used predominantly in the United States during a tax year, all depreciation deductions allowable for that year are treated as U. H and r block login S. H and r block login depreciation adjustments. H and r block login But there are some exceptions for certain transportation, communications, and other property used internationally. H and r block login   Gain from the sale of depreciable property that is more than the total depreciation adjustments on the property is sourced as if the property were inventory property, as discussed above. H and r block login   A loss is sourced in the same way as the depreciation deductions were sourced. H and r block login However, if the property was used predominantly in the United States, the entire loss reduces U. H and r block login S. H and r block login source income. H and r block login   The basis of property usually means the cost (money plus the fair market value of other property or services) of property you acquire. H and r block login Depreciation is an amount deducted to recover the cost or other basis of a trade or business asset. H and r block login The amount you can deduct depends on the property's cost, when you began using the property, how long it will take to recover your cost, and which depreciation method you use. H and r block login A depreciation deduction is any deduction for depreciation or amortization or any other allowable deduction that treats a capital expenditure as a deductible expense. H and r block login Intangible property. H and r block login   Intangible property includes patents, copyrights, secret processes or formulas, goodwill, trademarks, trade names, or other like property. H and r block login The gain from the sale of amortizable or depreciable intangible property, up to the previously allowable amortization or depreciation deductions, is sourced in the same way as the original deductions were sourced. H and r block login This is the same as the source rule for gain from the sale of depreciable property. H and r block login See Depreciable property , earlier, for details on how to apply this rule. H and r block login   Gain in excess of the amortization or depreciation deductions is sourced in the country where the property is used if the income from the sale is contingent on the productivity, use, or disposition of that property. H and r block login If the income is not contingent on the productivity, use, or disposition of the property, the income is sourced according to your tax home as discussed earlier. H and r block login If payments for goodwill do not depend on its productivity, use, or disposition, their source is the country in which the goodwill was generated. H and r block login Sales through offices or fixed places of business. H and r block login   Despite any of the earlier rules, if you do not have a tax home in the United States, but you maintain an office or other fixed place of business in the United States, treat the income from any sale of personal property (including inventory property) that is attributable to that office or place of business as U. H and r block login S. H and r block login source income. H and r block login However, this rule does not apply to sales of inventory property for use, disposition, or consumption outside the United States if your office or other fixed place of business outside the United States materially participated in the sale. H and r block login   If you have a tax home in the United States but maintain an office or other fixed place of business outside the United States, income from sales of personal property, other than inventory, depreciable property, or intangibles, that is attributable to that foreign office or place of business may be treated as U. H and r block login S. H and r block login source income. H and r block login The income is treated as U. H and r block login S. H and r block login source income if an income tax of less than 10% of the income from the sale is paid to a foreign country. H and r block login This rule also applies to losses if the foreign country would have imposed an income tax of less than 10% had the sale resulted in a gain. H and r block login Community Income If you are married and you or your spouse is subject to the community property laws of a foreign country, a U. H and r block login S. H and r block login state, or a U. H and r block login S. H and r block login possession, you generally must follow those laws to determine the income of yourself and your spouse for U. H and r block login S. H and r block login tax purposes. H and r block login But you must disregard certain community property laws if: Both you and your spouse are nonresident aliens, or One of you is a nonresident alien and the other is a U. H and r block login S. H and r block login citizen or resident and you do not both choose to be treated as U. H and r block login S. H and r block login residents as explained in chapter 1. H and r block login In these cases, you and your spouse must report community income as explained later. H and r block login Earned income. H and r block login   Earned income of a spouse, other than trade or business income and a partner's distributive share of partnership income, is treated as the income of the spouse whose services produced the income. H and r block login That spouse must report all of it on his or her separate return. H and r block login Trade or business income. H and r block login   Trade or business income, other than a partner's distributive share of partnership income, is treated as the income of the spouse carrying on the trade or business. H and r block login That spouse must report all of it on his or her separate return. H and r block login Partnership income (or loss). H and r block login   A partner's distributive share of partnership income (or loss) is treated as the income (or loss) of the partner. H and r block login The partner must report all of it on his or her separate return. H and r block login Separate property income. H and r block login   Income derived from the separate property of one spouse (and which is not earned income, trade or business income, or partnership distributive share income) is treated as the income of that spouse. H and r block login That spouse must report all of it on his or her separate return. H and r block login Use the appropriate community property law to determine what is separate property. H and r block login Other community income. H and r block login   All other community income is treated as provided by the applicable community property laws. H and r block login Prev  Up  Next   Home   More Online Publications
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Tax Relief for Victims of Severe Storms in Illinois

IL/KS/MO-2013-50, Nov. 27, 2013

ST. LOUIS — Victims of severe storms, straight-line winds and tornadoes that began on Nov. 17, 2013 in parts of Illinois may qualify for tax relief from the Internal Revenue Service.

Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Illinois will receive tax relief, and other locations may be added in coming days based on additional damage assessments by FEMA.

The President has declared the counties of Champaign, Douglas, Fayette, Grundy, Jasper, La Salle, Massac, Pope, Tazewell, Vermilion, Wabash, Washington, Wayne, Will and Woodford a federal disaster area. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Nov. 17, and on or before Feb. 28, 2014, have been postponed to Feb. 28, 2014.

The IRS is also waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Nov. 17, and on or before Dec. 2, as long as the deposits are made by Dec. 2, 2013.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Feb. 28, 2014, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Nov. 17 and on or before Feb. 28, 2014.

The IRS also gives affected taxpayers until Feb. 28, 2014, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Nov. 17 and on or before Feb. 28, 2014.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Nov. 17 and on or before Dec. 2 provided the taxpayer makes these deposits by Dec. 2.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Illinois/ Severe Storms, Straight-line Winds, and Tornadoes” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 800-TAX-FORM (800-829-3676). The IRS toll-free number for general tax questions is 800-829-1040.

Related Information

Disaster Assistance and Emergency Relief for Individuals and Businesses

Recent IRS Disaster Relief Announcements

Page Last Reviewed or Updated: 27-Nov-2013

The H And R Block Login

H and r block login Publication 721 - Main Content Table of Contents Part I General InformationRefund of Contributions Tax Withholding and Estimated Tax Filing Requirements Part II Rules for RetireesAnnuity starting date. H and r block login Gross monthly rate. H and r block login Your cost. H and r block login Choosing a survivor annuity after retirement. H and r block login Canceling a survivor annuity after retirement. H and r block login Annuity starting date after 1986. H and r block login Annuity starting date before 1987. H and r block login Simplified Method General Rule Three-Year Rule Alternative Annuity Option Federal Gift Tax Retirement During the Past Year Reemployment After Retirement Nonresident Aliens Thrift Savings Plan Rollover Rules Distributions Used To Pay Insurance Premiums for Public Safety Officers How To Report Benefits Part III Rules for Disability Retirement and Credit for the Elderly or the DisabledDisability Annuity Other Benefits Credit for the Elderly or the Disabled Part IV Rules for Survivors of Federal EmployeesFERS Death Benefit CSRS or FERS Survivor Annuity Lump-Sum CSRS or FERS Payment Thrift Savings Plan Federal Estate Tax Part V Rules for Survivors of Federal RetireesCSRS or FERS Survivor Annuity Lump-Sum CSRS or FERS Payment Voluntary Contributions Thrift Savings Plan Federal Estate Tax Income Tax Deduction for Estate Tax Paid How To Get Tax HelpLow Income Taxpayer Clinics Part I General Information This part of the publication contains information that can apply to most recipients of civil service retirement benefits. H and r block login Refund of Contributions If you leave federal government service or transfer to a job not under the CSRS or FERS and you are not eligible for an immediate annuity, you can choose to receive a refund of the money in your CSRS or FERS retirement account. H and r block login The refund will include both regular and voluntary contributions you made to the fund, plus any interest payable. H and r block login If the refund includes only your contributions, none of the refund is taxable. H and r block login If it includes any interest, the interest is taxable unless you roll it over directly into another qualified plan or a traditional individual retirement arrangement (IRA). H and r block login If you do not have the Office of Personnel Management (OPM) transfer the interest to an IRA or other plan in a direct rollover, tax will be withheld at a 20% rate. H and r block login See Rollover Rules in Part II for information on how to make a rollover. H and r block login Interest is not paid on contributions to the CSRS for service after 1956 unless your service was for more than 1 year but not more than 5 years. H and r block login Therefore, many employees who withdraw their contributions under the CSRS do not get interest and do not owe any tax on their refund. H and r block login If you do not roll over interest included in your refund, it may qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. H and r block login If you separate from service before the calendar year in which you reach age 55, it may be subject to an additional 10% tax on early distributions. H and r block login For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575. H and r block login A lump-sum distribution is eligible for capital gain treatment or the 10-year tax option only if the plan participant was born before January 2, 1936. H and r block login Tax Withholding and Estimated Tax The CSRS or FERS annuity you receive is subject to federal income tax withholding, unless you choose not to have tax withheld. H and r block login OPM will tell you how to make the choice. H and r block login The choice for no withholding remains in effect until you change it. H and r block login These withholding rules also apply to a disability annuity, whether received before or after minimum retirement age. H and r block login If you choose not to have tax withheld, or if you do not have enough tax withheld, you may have to make estimated tax payments. H and r block login You may owe a penalty if the total of your withheld tax and estimated tax does not cover most of the tax shown on your return. H and r block login Generally, you will owe the penalty for 2014 if the additional tax you must pay with your return is $1,000 or more and more than 10% of the tax to be shown on your 2014 return. H and r block login For more information, including exceptions to the penalty, see chapter 4 of Publication 505, Tax Withholding and Estimated Tax. H and r block login Form CSA 1099R. H and r block login   Form CSA 1099R is mailed to you by OPM each year. H and r block login It will show any tax you had withheld. H and r block login File a copy of Form CSA 1099R with your tax return if any federal income tax was withheld. H and r block login    You also can view and download your Form CSA 1099R by visiting the OPM website at  www. H and r block login servicesonline. H and r block login opm. H and r block login gov. H and r block login To log in, you will need your retirement CSA claim number and your personal identification number. H and r block login Choosing no withholding on payments outside the United States. H and r block login   The choice for no withholding generally cannot be made for annuity payments to be delivered outside the United States and its possessions. H and r block login   To choose no withholding if you are a U. H and r block login S. H and r block login citizen or resident alien, you must provide OPM with your home address in the United States or its possessions. H and r block login Otherwise, OPM has to withhold tax. H and r block login For example, OPM must withhold if you provide a U. H and r block login S. H and r block login address for a nominee, trustee, or agent (such as a bank) to whom the benefits are to be delivered, but you do not provide your own U. H and r block login S. H and r block login home address. H and r block login   If you do not provide a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to OPM that you are not a U. H and r block login S. H and r block login citizen, a U. H and r block login S. H and r block login resident alien, or someone who left the United States to avoid tax. H and r block login But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. H and r block login For details, see Publication 519, U. H and r block login S. H and r block login Tax Guide for Aliens. H and r block login Withholding certificate. H and r block login   If you give OPM a Form W-4P-A, Election of Federal Income Tax Withholding, you can choose not to have tax withheld or you can choose to have tax withheld. H and r block login The amount of tax withheld depends on your marital status, the number of withholding allowances, and any additional amount you designate to be withheld. H and r block login If you do not make either of these choices, OPM must withhold as if you were married with three withholding allowances. H and r block login To change the amount of tax withholding or to stop withholding, call OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D. H and r block login C. H and r block login calling area must call 202-606-0500). H and r block login No special form is needed. H and r block login You will need your retirement CSA or CSF claim number, your social security number, and your personal identification number (PIN) when you call. H and r block login If you have TTY/TDD equipment, call 1-855–887–4957. H and r block login If you need a PIN, call OPM's Retirement Information Office. H and r block login You also can change the amount of withholding or stop withholding online by visiting the OPM website at www. H and r block login servicesonline. H and r block login opm. H and r block login gov. H and r block login You will need your retirement CSA or CSF claim number and your PIN. H and r block login Withholding from certain lump-sum payments. H and r block login   If you leave the federal government before becoming eligible to retire and you apply for a refund of your CSRS or FERS contributions, or you die without leaving a survivor eligible for an annuity, you or your beneficiary will receive a distribution of your contributions to the retirement plan plus any interest payable. H and r block login Tax will be withheld at a 20% rate on the interest distributed. H and r block login However, tax will not be withheld if you have OPM transfer (roll over) the interest directly to your traditional IRA or other qualified plan. H and r block login If you have OPM transfer (roll over) the interest directly to a Roth IRA, the entire amount will be taxed in the current year. H and r block login Because no income tax will be withheld at the time of the transfer, you may want to increase your withholding or pay estimated taxes. H and r block login See Rollover Rules in Part II. H and r block login If you receive only your contributions, no tax will be withheld. H and r block login Withholding from Thrift Savings Plan payments. H and r block login   Generally, a distribution that you receive from the TSP is subject to federal income tax withholding. H and r block login The amount withheld is: 20% if the distribution is an eligible rollover distribution, 10% if it is a nonperiodic distribution other than an eligible rollover distribution, or An amount determined as if you were married with three withholding allowances, unless you submit a withholding certificate (Form W-4P), if it is a periodic distribution. H and r block login  However, you usually can choose not to have tax withheld from TSP payments other than eligible rollover distributions. H and r block login By January 31 after the end of the year in which you receive a distribution, the TSP will issue Form 1099-R showing the total distributions you received in the prior year and the amount of tax withheld. H and r block login   For a detailed discussion of withholding on distributions from the TSP, see Important Tax Information About Payments From Your TSP Account, available from your agency personnel office or from the TSP. H and r block login The above document is also available in the “Forms & Publications” section of the TSP website at www. H and r block login tsp. H and r block login gov. H and r block login Estimated tax. H and r block login   Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax for 2014 (after subtracting your withholding and credits) and you expect your withholding and your credits to be less than the smaller of: 90% of the tax to be shown on your income tax return for 2014, or 100% of the tax shown on your 2013 income tax return (110% of that amount if the adjusted gross income shown on the return was more than $150,000 ($75,000 if your filing status for 2014 will be married filing separately)). H and r block login The return must cover all 12 months. H and r block login   You do not have to pay estimated tax for 2014 if you were a U. H and r block login S. H and r block login citizen or resident alien for all of 2013 and you had no tax liability for the full 12-month 2013 tax year. H and r block login   Publication 505 contains information that you can use to help you figure your estimated tax payments. H and r block login Filing Requirements If your gross income, including the taxable part of your annuity, is less than a certain amount, you generally do not have to file a federal income tax return for that year. H and r block login The gross income filing requirements for the tax year are in the instructions to Form 1040, 1040A, or 1040EZ. H and r block login Children. H and r block login   If you are the surviving spouse of a federal employee or retiree and your monthly annuity check includes a survivor annuity for one or more children, each child's annuity counts as his or her own income (not yours) for federal income tax purposes. H and r block login   If your child can be claimed as a dependent, treat the taxable part of his or her annuity as unearned income when applying the filing requirements for dependents. H and r block login Form CSF 1099R. H and r block login   Form CSF 1099R will be mailed to you by January 31 after the end of each tax year. H and r block login It will show the total amount of the annuity you received in the past year. H and r block login It also should show, separately, the survivor annuity for a child or children. H and r block login Only the part that is each individual's survivor annuity should be shown on that individual's Form 1040 or 1040A. H and r block login   If your Form CSF 1099R does not show separately the amount paid to you for a child or children, attach a statement to your return, along with a copy of Form CSF 1099R, explaining why the amount shown on the tax return differs from the amount shown on Form CSF 1099R. H and r block login    You also can view and download your Form CSF 1099R by visiting the OPM website at  www. H and r block login servicesonline. H and r block login opm. H and r block login gov. H and r block login To log in you will need your retirement CSF claim number and personal identification number. H and r block login    You may request a Summary of Payments, showing the amounts paid to you for your child(ren), from OPM by calling OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D. H and r block login C. H and r block login calling area must call 202-606-0500). H and r block login You will need your CSF claim number and your social security number when you call. H and r block login Taxable part of annuity. H and r block login   To find the taxable part of a retiree's annuity when applying the filing requirements, see the discussion in Part II, Rules for Retirees , or Part III, Rules for Disability Retirement and Credit for the Elderly or the Disabled , whichever applies. H and r block login To find the taxable part of each survivor annuity when applying the filing requirements, see the discussion in Part IV, Rules for Survivors of Federal Employees , or Part V, Rules for Survivors of Federal Retirees , whichever applies. H and r block login Part II Rules for Retirees This part of the publication is for retirees who retired on nondisability retirement. H and r block login If you retired on disability before you reached your minimum retirement age, see Part III, Rules for Disability Retirement and Credit for the Elderly or the Disabled. H and r block login However, on the day after you reach your minimum retirement age, use the rules in this section to report your disability retirement and begin recovering your cost. H and r block login Annuity statement. H and r block login   The statement you received from OPM when your CSRS or FERS annuity was approved shows the commencing date (the annuity starting date), the gross monthly rate of your annuity benefit, and your total contributions to the retirement plan (your cost). H and r block login You will use this information to figure the tax-free recovery of your cost. H and r block login Annuity starting date. H and r block login   If you retire from federal government service on a regular annuity, your annuity starting date is the commencing date on your annuity statement from OPM. H and r block login If something delays payment of your annuity, such as a late application for retirement, it does not affect the date your annuity begins to accrue or your annuity starting date. H and r block login Gross monthly rate. H and r block login   This is the amount you were to get after any adjustment for electing a survivor's annuity or for electing the lump-sum payment under the alternative annuity option (if either applied) but before any deduction for income tax withholding, insurance premiums, etc. H and r block login Your cost. H and r block login   Your monthly annuity payment contains an amount on which you have previously paid income tax. H and r block login This amount represents part of your contributions to the retirement plan. H and r block login Even though you did not receive the money that was contributed to the plan, it was included in your gross income for federal income tax purposes in the years it was taken out of your pay. H and r block login   The cost of your annuity is the total of your contributions to the retirement plan, as shown on your annuity statement from OPM. H and r block login If you elected the alternative annuity option, it includes any deemed deposits and any deemed redeposits that were added to your lump-sum credit. H and r block login (See Lump-sum credit under Alternative Annuity Option, later. H and r block login )   If you repaid contributions that you had withdrawn from the retirement plan earlier, or if you paid into the plan to receive full credit for service not subject to retirement deductions, the entire repayment, including any interest, is a part of your cost. H and r block login You cannot claim an interest deduction for any interest payments. H and r block login You cannot treat these payments as voluntary contributions; they are considered regular employee contributions. H and r block login Recovering your cost tax free. H and r block login   How you figure the tax-free recovery of the cost of your CSRS or FERS annuity depends on your annuity starting date. H and r block login If your annuity starting date is before July 2, 1986, either the Three-Year Rule or the General Rule (both discussed later) applies to your annuity. H and r block login If 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 (discussed later). H and r block login If your annuity starting date is after November 18, 1996, you must use the Simplified Method. H and r block login   Under both the General Rule and the Simplified Method, each of your monthly annuity payments is made up of two parts: the tax-free part that is a return of your cost, and the taxable part that is the amount of each payment that is more than the part that represents your cost (unless such payment is used for purposes discussed under Distributions Used To Pay Insurance Premiums for Public Safety Officers , later). H and r block login The tax-free part is a fixed dollar amount. H and r block login It remains the same, even if your annuity is increased. H and r block login Generally, this rule applies as long as you receive your annuity. H and r block login However, see Exclusion limit , later. H and r block login Choosing a survivor annuity after retirement. H and r block login    If you retired without a survivor annuity and report your annuity under the Simplified Method, do not change your tax-free monthly amount even if you later choose a survivor annuity. H and r block login   If you retired without a survivor annuity and report your annuity under the General Rule, you must figure the tax-free part of your annuity using a new exclusion percentage if you later choose a survivor annuity and take reduced annuity payments. H and r block login To figure the new exclusion percentage, reduce your cost by the amount you previously recovered tax free. H and r block login Figure the expected return as of the date the reduced annuity begins. H and r block login For details on the General Rule, see Publication 939. H and r block login Canceling a survivor annuity after retirement. H and r block login   If you retired with a survivor annuity payable to your spouse upon your death and you notify OPM that your marriage has ended, your annuity might be increased to remove the reduction for a survivor benefit. H and r block login The increased annuity does not change the cost recovery you figured at the annuity starting date. H and r block login The tax-free part of each annuity payment remains the same. H and r block login    For more information about choosing or canceling a survivor annuity after retirement, contact OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D. H and r block login C. H and r block login calling area must call 202-606-0500). H and r block login Exclusion limit. H and r block login   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. H and r block login Annuity starting date after 1986. H and r block login   If your annuity starting date is after 1986, the total amount of annuity income that you (or the survivor annuitant) can exclude over the years as a return of your cost cannot exceed your total cost. H and r block login Annuity payments you or your survivors receive after the total cost in the plan has been recovered are generally fully taxable. H and r block login Example. H and r block login Your annuity starting date is after 1986 and you exclude $100 a month under the Simplified Method. H and r block login If your cost is $12,000, the exclusion ends after 10 years (120 months). H and r block login Thereafter, your entire annuity is generally fully taxable. H and r block login Annuity starting date before 1987. H and r block login   If your annuity starting date is before 1987, you can continue to take your monthly exclusion figured under the General Rule or Simplified Method for as long as you receive your annuity. H and r block login If you chose a joint and survivor annuity, your survivor can continue to take that same exclusion. H and r block login The total exclusion may be more than your cost. H and r block login Deduction of unrecovered cost. H and r block login   If your annuity starting date is after July 1, 1986, and the cost of your annuity has not been fully recovered at your (or the survivor annuitant's) death, a deduction is allowed for the unrecovered cost. H and r block login The deduction is claimed on your (or your survivor's) final tax return as a miscellaneous itemized deduction (not subject to the 2%-of-adjusted-gross-income limit). H and r block login If your annuity starting date is before July 2, 1986, no tax benefit is allowed for any unrecovered cost at death. H and r block login Simplified Method If your annuity starting date is after November 18, 1996, you must use the Simplified Method to figure the tax-free part of your CSRS or FERS annuity. H and r block login (OPM has figured the taxable amount of your annuity shown on your Form CSA 1099R using the Simplified Method. H and r block login ) You could have chosen to use either the Simplified Method or the General Rule if your annuity starting date is after July 1, 1986, but before November 19, 1996. H and r block login The Simplified Method does not apply if your annuity starting date is before July 2, 1986. H and r block login Under the Simplified Method, you figure the tax-free part of each full monthly payment by dividing your cost by a number of months based on your age. H and r block login This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. H and r block login If your annuity starting date is after 1997 and your annuity includes a survivor benefit for your spouse, this number is based on your combined ages. H and r block login Worksheet A. H and r block login   Use Worksheet A. H and r block login Simplified Method (near the end of this publication), to figure your taxable annuity. H and r block login Be sure to keep the completed worksheet. H and r block login It will help you figure your taxable amounts for later years. H and r block login Instead of Worksheet A, you generally can use the Simplified Method Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR to figure your taxable annuity. H and r block login However, you must use Worksheet A and Worksheet B in this publication if you chose the alternative annuity option, discussed later. H and r block login Line 2. H and r block login   See Your cost , earlier, for an explanation of your cost in the plan. H and r block login If your annuity starting date is after November 18, 1996, and you chose the alternative annuity option (explained later), you must reduce your cost by the tax-free part of the lump-sum payment you received. H and r block login Line 3. H and r block login   The number you enter on line 3 is the appropriate number from Table 1 or 2 representing approximate life expectancies in months. H and r block login If your annuity starting date is after 1997, use: Table 1 for an annuity without a survivor benefit, or Table 2 for an annuity with a survivor benefit. H and r block login If your annuity starting date is before 1998, use Table 1. H and r block login Line 6. H and r block login   If you received contributions tax free before 2013, the amount previously recovered tax free that you must enter on line 6 is the total amount from line 10 of last year's worksheet. H and r block login If your annuity starting date is before November 19, 1996, and you chose the alternative annuity option, this amount includes the tax-free part of the lump-sum payment you received. H and r block login Example. H and r block login Bill Smith retired from the Federal Government on March 31, 2013, under an annuity that will provide a survivor benefit for his wife, Kathy. H and r block login His annuity starting date is April 1, 2013, the annuity is paid in arrears, and he received his first monthly annuity payment on May 1, 2013. H and r block login He must use the Simplified Method to figure the tax-free part of his annuity benefits. H and r block login Bill's monthly annuity benefit is $1,000. H and r block login He had contributed $31,000 to his retirement plan and had received no distributions before his annuity starting date. H and r block login At his annuity starting date, he was 65 and Kathy was 57. H and r block login Bill's completed Worksheet A is shown later. H and r block login To complete line 3, he used Table 2 at the bottom of the worksheet and found that 310 is the number in the second column opposite the age range that includes 122 (his and Kathy's combined ages). H and r block login Bill keeps a copy of the completed worksheet for his records. H and r block login It will help him (and Kathy, if she survives him) figure the taxable amount of the annuity in later years. H and r block login Bill's tax-free monthly amount is $100. H and r block login (See line 4 of the worksheet. H and r block login ) If he lives to collect more than 310 monthly payments, he will generally have to include in his gross income the full amount of any annuity payments received after 310 payments have been made. H and r block login If Bill does not live to collect 310 monthly payments and his wife begins to receive monthly payments, she also will exclude $100 from each monthly payment until 310 payments (Bill's and hers) have been collected. H and r block login If she dies before 310 payments have been made, a miscellaneous itemized deduction (not subject to the 2%-of-adjusted- gross-income limit) will be allowed for the unrecovered cost on her final income tax return. H and r block login General Rule If your annuity starting date is after November 18, 1996, you cannot use the General Rule to figure the tax-free part of your CSRS or FERS annuity. H and r block login If your annuity starting date is after July 1, 1986, but before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method. H and r block login If your annuity starting date is before July 2, 1986, you could have chosen to use the General Rule only if you could not use the Three-Year Rule. H and r block login Under the General Rule, you figure the tax-free part of each full monthly payment by multiplying the initial gross monthly rate of your annuity by an exclusion percentage. H and r block login Figuring this percentage is complex and requires the use of actuarial tables. H and r block login For these tables and other information about using the General Rule, see Publication 939. H and r block login Three-Year Rule If your annuity starting date was before July 2, 1986, you probably had to report your annuity using the Three-Year Rule. H and r block login Under this rule, you excluded all the annuity payments from income until you fully recovered your cost. H and r block login After your cost was recovered, all payments became fully taxable. H and r block login You cannot use another rule to again exclude amounts from income. H and r block login The Three-Year Rule was repealed for retirees whose annuity starting date is after July 1, 1986. H and r block login Worksheet A. H and r block login Simplified Method for Bill Smith See the instructions in Part II of this publication under Simplified Method. H and r block login 1. H and r block login Enter the total pension or annuity payments received this year. H and r block login Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. H and r block login $ 8,000 2. H and r block login Enter your cost in the plan at the annuity starting date, plus any death benefit exclusion*. H and r block login See Your cost in Part II, Rules for Retirees, earlier 2. H and r block login 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). H and r block login Otherwise, go to line 3. H and r block login   3. H and r block login Enter the appropriate number from Table 1 below. H and r block login 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. H and r block login 3. H and r block login 310 4. H and r block login Divide line 2 by the number on line 3 4. H and r block login 100 5. H and r block login Multiply line 4 by the number of months for which this year's payments were made. H and r block login If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. H and r block login Otherwise, go to line 6 5. H and r block login 800 6. H and r block login Enter any amounts previously recovered tax free in years after 1986. H and r block login This is the amount shown on line 10 of your worksheet for last year 6. H and r block login 0 7. H and r block login Subtract line 6 from line 2 7. H and r block login 31,000 8. H and r block login Enter the smaller of line 5 or line 7 8. H and r block login 800 9. H and r block login Taxable amount for year. H and r block login Subtract line 8 from line 1. H and r block login Enter the result, but not less than zero. H and r block login Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b. H and r block login If you are a nonresident alien, also enter this amount on line 1 of Worksheet C. H and r block login If your Form CSA 1099R or Form CSF 1099R shows a larger amount, use the amount figured on this line instead. H and r block login If you are a retired public safety officer, see Distributions Used To Pay Insurance Premiums for Public Safety Officers in Part II before entering an amount on your tax return or Worksheet C, line 1 9. H and r block login $7,200 10. H and r block login Was your annuity starting date before 1987?   Yes. H and r block login Do not complete the rest of this worksheet. H and r block login    No. H and r block login Add lines 6 and 8. H and r block login This is the amount you have recovered tax free through 2013. H and r block login You will need this number if you need to fill out this worksheet next year 10. H and r block login 800 11. H and r block login Balance of cost to be recovered. H and r block login Subtract line 10 from line 2. H and r block login If zero, you will not have to complete this worksheet next year. H and r block login The payments you receive next year will generally be fully taxable 11. H and r block login $30,200 Table 1 for Line 3 Above    IF your age on your  annuity starting date was   AND your annuity starting date was—     before November 19, 1996,  THEN enter on line 3 after November 18, 1996,  THEN enter on line 3   55 or under 300 360   56–60 260 310   61–65 240 260   66–70 170 210   71 or over 120 160  Table 2 for Line 3 Above    IF the annuitants' combined ages on your annuity starting date were   THEN enter on line 3         110 or under   410         111–120   360         121–130   310         131–140   260         141 or over   210       * A death benefit exclusion of up to $5,000 applied to certain benefits received by survivors of employees who died before August 21, 1996. H and r block login Alternative Annuity Option If you are eligible, you may choose an alternative form of annuity. H and r block login If you make this choice, you will receive a lump-sum payment equal to your contributions to the plan and a reduced monthly annuity. H and r block login You are eligible to make this choice if you meet all of the following requirements. H and r block login You are retiring, but not on disability. H and r block login You have a life-threatening illness or other critical medical condition. H and r block login You do not have a former spouse entitled to court ordered benefits based on your service. H and r block login If you are not eligible or do not choose this alternative annuity, you can skip the following discussion and go to Federal Gift Tax , later. H and r block login Lump-Sum Payment The lump-sum payment you receive under the alternative annuity option generally has a tax-free part and a taxable part. H and r block login The tax-free part represents part of your cost. H and r block login The taxable part represents part of the earnings on your annuity contract. H and r block login Your lump-sum credit (discussed later) may include a deemed deposit or redeposit that is treated as being included in your lump-sum payment even though you do not actually receive such amounts. H and r block login Deemed deposits and redeposits, which are described later under Lump-sum credit , are taxable to you in the year of retirement. H and r block login Your taxable amount may therefore be more than the lump-sum payment you receive. H and r block login You must include the taxable part of the lump-sum payment in your income for the year you receive the payment unless you roll it over into another qualified plan or an IRA. H and r block login If you do not have OPM transfer the taxable amount to an IRA or other plan in a direct rollover, tax will be withheld at a 20% rate. H and r block login See Rollover Rules , later, for information on how to make a rollover. H and r block login OPM can make a direct rollover only up to the amount of the lump-sum payment. H and r block login Therefore, to defer tax on the full taxable amount if it is more than the payment, you must add funds from another source. H and r block login The taxable part of the lump-sum payment does not qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. H and r block login It also may be subject to an additional 10% tax on early distributions if you separate from service before the calendar year in which you reach age 55, even if you reach age 55 in the year you receive the lump-sum payment. H and r block login For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575. H and r block login Worksheet B. H and r block login   Use Worksheet B. H and r block login Lump-Sum Payment (near the end of this publication), to figure the taxable part of your lump-sum payment. H and r block login Be sure to keep the completed worksheet for your records. H and r block login   To complete the worksheet, you will need to know the amount of your lump-sum credit and the present value of your annuity contract. H and r block login Lump-sum credit. H and r block login   Generally, this is the same amount as the lump-sum payment you receive (the total of your contributions to the retirement system). H and r block login However, for purposes of the alternative annuity option, your lump-sum credit also may include deemed deposits and redeposits that OPM advanced to your retirement account so that you are given credit for the service they represent. H and r block login Deemed deposits (including interest) are for federal employment during which no retirement contributions were taken out of your pay. H and r block login Deemed redeposits (including interest) are for any refunds of retirement contributions that you received and did not repay. H and r block login You are treated as if you had received a lump-sum payment equal to the amount of your lump-sum credit and then had made a repayment to OPM of the advanced amounts. H and r block login Present value of your annuity contract. H and r block login   The present value of your annuity contract is figured using actuarial tables provided by the IRS. H and r block login If you are receiving a lump-sum payment under the Alternative Annuity Option, you can write to the address below to find out the present value of your annuity contract. H and r block login Internal Revenue Service Attn: Actuarial Group 2 TE/GE SE:T:EP:RA:T:A2 NCA-629 1111 Constitution Ave. H and r block login , NW Washington, DC 20224-0002 Example. H and r block login David Brown retired from the federal government in 2013, one month after his 55th birthday. H and r block login He had contributed $31,000 to his retirement plan and chose to receive a lump-sum payment of that amount under the alternative annuity option. H and r block login The present value of his annuity contract was $155,000. H and r block login The tax-free part and the taxable part of the lump-sum payment are figured using Worksheet B, as shown below. H and r block login The taxable part ($24,800) is also his net cost in the plan, which is used to figure the taxable part of his reduced annuity payments. H and r block login See Reduced Annuity , later. H and r block login Worksheet B. H and r block login Lump-Sum Payment for David Brown See the instructions in Part II of this publication under Alternative Annuity Option . H and r block login  1. H and r block login Enter your lump-sum credit (your cost in the plan at the annuity starting date) 1. H and r block login $ 31,000 2. H and r block login Enter the present value of your annuity contract 2. H and r block login 155,000 3. H and r block login Divide line 1 by line 2 3. H and r block login . H and r block login 20 4. H and r block login Tax-free amount. H and r block login Multiply line 1 by line 3. H and r block login (Caution: Do not include this amount on line 6 of Worksheet A in this publication. H and r block login ) 4. H and r block login $6,200 5. H and r block login Taxable amount (net cost in the plan). H and r block login Subtract line 4 from line 1. H and r block login Include this amount in the total on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. H and r block login Also, enter this amount on line 2 of Worksheet A in this publication. H and r block login 5. H and r block login $24,800   Lump-sum payment in installments. H and r block login   If you choose the alternative annuity option, you usually will receive the lump-sum payment in two equal installments. H and r block login You will receive the first installment after you make the choice upon retirement. H and r block login The second installment will be paid to you, with interest, in the next calendar year. H and r block login (Exceptions to the installment rule are provided for cases of critical medical need. H and r block login )   Even though the lump-sum payment is made in installments, the overall tax treatment (explained at the beginning of this discussion) is the same as if the whole payment were paid at once. H and r block login If the payment has a tax-free part, you must treat the taxable part as received first. H and r block login How to report. H and r block login   Add any actual or deemed payment of your lump-sum credit (defined earlier) to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. H and r block login Add the taxable part to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b, unless you roll over the taxable part to your traditional IRA or a qualified retirement plan. H and r block login    If you receive the lump-sum payment in two installments, include any interest paid with the second installment on line 8a of either Form 1040 or Form 1040A, or on line 9a of Form 1040NR. H and r block login Reduced Annuity If you have chosen to receive a lump-sum payment under the alternative annuity option, you also will receive reduced monthly annuity payments. H and r block login These annuity payments each will have a tax-free and a taxable part. H and r block login To figure the tax-free part of each annuity payment, you must use the Simplified Method (Worksheet A). H and r block login For instructions on how to complete the worksheet, see Worksheet A under Simplified Method, earlier. H and r block login To complete Worksheet A, line 2, you must reduce your cost in the plan by the tax-free part of the lump-sum payment you received. H and r block login Enter as your net cost on line 2 the amount from Worksheet B, line 5. H and r block login Do not include the tax-free part of the lump-sum payment with other amounts recovered tax free (Worksheet A, line 6) when limiting your total exclusion to your total cost. H and r block login Example. H and r block login The facts are the same as in the example for David Brown in the preceding discussion. H and r block login In addition, David received 10 annuity payments in 2013 of $1,200 each. H and r block login Using Worksheet A, he figures the taxable part of his annuity payments. H and r block login He completes line 2 by reducing his $31,000 cost by the $6,200 tax-free part of his lump-sum payment. H and r block login His entry on line 2 is his $24,800 net cost in the plan (the amount from Worksheet B, line 5). H and r block login He does not include the tax-free part of his lump-sum payment on Worksheet A, line 6. H and r block login David's filled-in Worksheet A is shown on the next page. H and r block login Worksheet A. H and r block login Simplified Method for David Brown See the instructions in Part II of this publication under Simplified Method . H and r block login 1. H and r block login Enter the total pension or annuity payments received this year. H and r block login Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. H and r block login $ 12,000 2. H and r block login Enter your cost in the plan at the annuity starting date, plus any death benefit exclusion*. H and r block login See Your cost in Part II, Rules for Retirees, earlier 2. H and r block login 24,800 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). H and r block login Otherwise, go to line 3. H and r block login   3. H and r block login Enter the appropriate number from Table 1 below. H and r block login 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. H and r block login 3. H and r block login 360 4. H and r block login Divide line 2 by the number on line 3 4. H and r block login 68. H and r block login 89 5. H and r block login Multiply line 4 by the number of months for which this year's payments were made. H and r block login If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. H and r block login Otherwise, go to line 6 5. H and r block login 688. H and r block login 90 6. H and r block login Enter any amounts previously recovered tax free in years after 1986. H and r block login This is the amount shown on line 10 of your worksheet for last year 6. H and r block login 0 7. H and r block login Subtract line 6 from line 2 7. H and r block login 24,800 8. H and r block login Enter the smaller of line 5 or line 7 8. H and r block login 688. H and r block login 90 9. H and r block login Taxable amount for year. H and r block login Subtract line 8 from line 1. H and r block login Enter the result, but not less than zero. H and r block login Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b. H and r block login If you are a nonresident alien, also enter this amount on line 1 of Worksheet C. H and r block login If your Form CSA 1099R or Form CSF 1099R shows a larger amount, use the amount figured on this line instead. H and r block login If you are a retired public safety officer, see Distributions Used To Pay Insurance Premiums for Public Safety Officers in Part II before entering an amount on your tax return or Worksheet C, line 1 9. H and r block login $11,311. H and r block login 10 10. H and r block login Was your annuity starting date before 1987?   Yes. H and r block login Do not complete the rest of this worksheet. H and r block login    No. H and r block login Add lines 6 and 8. H and r block login This is the amount you have recovered tax free through 2013. H and r block login You will need this number if you need to fill out this worksheet next year 10. H and r block login 688. H and r block login 90 11. H and r block login Balance of cost to be recovered. H and r block login Subtract line 10 from line 2. H and r block login If zero, you will not have to complete this worksheet next year. H and r block login The payments you receive next year will generally be fully taxable 11. H and r block login $24,111. H and r block login 10 Table 1 for Line 3 Above    IF your age on your annuity starting date was   AND your annuity starting date was—     before November 19, 1996,  THEN enter on line 3 after November 18, 1996,  THEN enter on line 3   55 or under 300 360   56–60 260 310   61–65 240 260   66–70 170 210   71 or over 120 160  Table 2 for Line 3 Above    IF the annuitants' combined ages on your annuity starting date were   THEN enter on line 3         110 or under   410         111–120   360         121–130   310         131–140   260         141 or over   210       * A death benefit exclusion of up to $5,000 applied to certain benefits received by survivors of employees who died before August 21, 1996. H and r block login Reemployment after choosing the alternative annuity option. H and r block login If you chose this option when you retired and then you were reemployed by the Federal Government before retiring again, your Form CSA 1099R may show only the amount of your contributions to your retirement plan during your reemployment. H and r block login If the amount on the form does not include all your contributions, disregard it and use your total contributions to figure the taxable part of your annuity payments. H and r block login Annuity starting date before November 19, 1996. H and r block login   If your annuity starting date is before November 19, 1996, and you chose the alternative annuity option, the taxable and tax-free parts of your lump-sum payment and your annuity payments are figured using different rules. H and r block login Under those rules, you do not reduce your cost in the plan (Worksheet A, line 2) by the tax-free part of the lump-sum payment. H and r block login However, you must include that tax-free amount with other amounts previously recovered tax free (Worksheet A, line 6) when limiting your total exclusion to your total cost. H and r block login Federal Gift Tax If, through the exercise or nonexercise of an election or option, you provide an annuity for your beneficiary at or after your death, you have made a gift. H and r block login The gift may be taxable for gift tax purposes. H and r block login The value of the gift is equal to the value of the annuity. H and r block login Joint and survivor annuity. H and r block login   If the gift is an interest in a joint and survivor annuity where only you and your spouse can receive payments before the death of the last spouse to die, the gift generally will qualify for the unlimited marital deduction. H and r block login This will eliminate any gift tax liability with regard to that gift. H and r block login   If you provide survivor annuity benefits for someone other than your current spouse, such as your former spouse, the unlimited marital deduction will not apply. H and r block login This may result in a taxable gift. H and r block login More information. H and r block login   For information about the gift tax, see Publication 950, Introduction to Estate and Gift Taxes, and Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, and its instructions. H and r block login Retirement During the Past Year If you have recently retired, the following discussions covering annual leave, voluntary contributions, and community property may apply to you. H and r block login Annual leave. H and r block login   A payment for accrued annual leave received on retirement is a salary payment. H and r block login It is taxable as wages in the tax year you receive it. H and r block login Voluntary contributions. H and r block login   Voluntary contributions to the retirement fund are those made in addition to the regular contributions that were deducted from your salary. H and r block login They also include the regular contributions withheld from your salary after you have the years of service necessary for the maximum annuity allowed by law. H and r block login Voluntary contributions are not the same as employee contributions to the Thrift Savings Plan. H and r block login See Thrift Savings Plan , later. H and r block login Additional annuity benefit. H and r block login   If you choose to receive an additional annuity benefit from your voluntary contributions, it is treated separately from the annuity benefit that comes from the regular contributions deducted from your salary. H and r block login This separate treatment applies for figuring the amounts to be excluded from, and included in, gross income. H and r block login It does not matter that you receive only one monthly check covering both benefits. H and r block login Each year you will receive a Form CSA 1099R that will show how much of your total annuity received in the past year was from each type of benefit. H and r block login   Figure the taxable and tax-free parts of your additional monthly benefits from voluntary contributions using the rules that apply to regular CSRS and FERS annuities, as explained earlier. H and r block login Refund of voluntary contributions. H and r block login   If you choose to receive a refund of your voluntary contributions plus accrued interest, the interest is taxable to you in the tax year it is distributed unless you roll it over to a traditional IRA or another qualified retirement plan. H and r block login If you do not have OPM transfer the interest to a traditional IRA or other qualified retirement plan in a direct rollover, tax will be withheld at a 20% rate. H and r block login See Rollover Rules , later. H and r block login The interest does not qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. H and r block login It also may be subject to an additional 10% tax on early distributions if you separate from service before the calendar year in which you reach age 55. H and r block login For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575. H and r block login Community property laws. H and r block login   State community property laws apply to your annuity. H and r block login These laws will affect your income tax only if you file a return separately from your spouse. H and r block login   Generally, the determination of whether your annuity is separate income (taxable to you) or community income (taxable to both you and your spouse) is based on your marital status and domicile when you were working. H and r block login Regardless of whether you are now living in a community property state or a noncommunity property state, your current annuity may be community income if it is based on services you performed while married and domiciled in a community property state. H and r block login   At any time, you have only one domicile even though you may have more than one home. H and r block login Your domicile is your fixed and permanent legal home that you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. H and r block login The question of your domicile is mainly a matter of your intentions as indicated by your actions. H and r block login   If your annuity is a mixture of community income and separate income, you must divide it between the two kinds of income. H and r block login The division is based on your periods of service and domicile in community and noncommunity property states while you were married. H and r block login   For more information, see Publication 555, Community Property. H and r block login Reemployment After Retirement If you retired from federal service and are later rehired by the Federal Government as an employee, you can continue to receive your annuity during reemployment. H and r block login The employing agency usually will pay you the difference between your salary for your period of reemployment and your annuity. H and r block login This amount is taxable as wages. H and r block login Your annuity will continue to be taxed just as it was before. H and r block login If you are still recovering your cost, you continue to do so. H and r block login If you have recovered your cost, the annuity you receive while you are reemployed generally is fully taxable. H and r block login Nonresident Aliens The following special rules apply to nonresident alien federal employees performing services outside the United States and to nonresident alien retirees and beneficiaries. H and r block login A nonresident alien is an individual who is not a citizen or a resident alien of the United States. H and r block login Special rule for figuring your total contributions. H and r block login   Your contributions to the retirement plan (your cost) also include the government's contributions to the plan to a certain extent. H and r block login You include government contributions that would not have been taxable to you at the time they were contributed if they had been paid directly to you. H and r block login For example, government contributions would not have been taxable to you if, at the time made, your services were performed outside the United States. H and r block login Thus, your cost is increased by these government contributions and the benefits that you, or your beneficiary, must include in income are reduced. H and r block login   This method of figuring your total contributions does not apply to any contributions the government made on your behalf after you became a citizen or a resident alien of the United States. H and r block login Limit on taxable amount. H and r block login   There is a limit on the taxable amount of payments received from the CSRS, the FERS, or the TSP by a nonresident alien retiree or nonresident alien beneficiary. H and r block login Figure this limited taxable amount by multiplying the otherwise taxable amount by a fraction. H and r block login The numerator of the fraction is the retiree's total U. H and r block login S. H and r block login Government basic pay, other than tax-exempt pay for services performed outside the United States. H and r block login The denominator is the retiree's total U. H and r block login S. H and r block login Government basic pay for all services. H and r block login    Basic pay includes regular pay plus any standby differential. H and r block login It does not include bonuses, overtime pay, certain retroactive pay, uniform or other allowances, or lump-sum leave payments. H and r block login   To figure the limited taxable amount of your CSRS or FERS annuity or your TSP distributions, use Worksheet C. H and r block login (For an annuity, first complete Worksheet A in this publication. H and r block login ) Worksheet C. H and r block login Limited Taxable Amount for Nonresident Alien 1. H and r block login Enter the otherwise taxable amount of the CSRS or FERS annuity (from line 9 of Worksheet A or from Forms CSA 1099R or CSF 1099R) or TSP distributions (from Form 1099R) 1. H and r block login   2. H and r block login Enter the total U. H and r block login S. H and r block login Government basic pay other than tax-exempt pay for services performed outside the United States 2. H and r block login   3. H and r block login Enter the total U. H and r block login S. H and r block login Government basic pay for all services 3. H and r block login   4. H and r block login Divide line 2 by line 3 4. H and r block login   5. H and r block login Limited taxable amount. H and r block login Multiply line 1 by line 4. H and r block login Enter this amount on Form 1040NR, line 17b 5. H and r block login   Example 1. H and r block login You are a nonresident alien who performed all services for the U. H and r block login S. H and r block login Government abroad as a nonresident alien. H and r block login You retired and began to receive a monthly annuity of $200. H and r block login Your total basic pay for all services for the U. H and r block login S. H and r block login Government was $100,000. H and r block login All of your basic pay was tax exempt because it was not U. H and r block login S. H and r block login source income. H and r block login The taxable amount of your annuity using Worksheet A in this publication is $720. H and r block login You are a nonresident alien, so you figure the limited taxable amount of your annuity using Worksheet C as follows. H and r block login Worksheet C. H and r block login Limited Taxable Amount for Nonresident Alien — Example 1 1. H and r block login Enter the otherwise taxable amount of the CSRS or FERS annuity (from line 9 of Worksheet A or from Forms CSA 1099R or CSF 1099R) or TSP distributions (from Form 1099R) 1. H and r block login $ 720 2. H and r block login Enter the total U. H and r block login S. H and r block login Government basic pay other than tax-exempt pay for services performed outside the United States 2. H and r block login 0 3. H and r block login Enter the total U. H and r block login S. H and r block login Government basic pay for all services 3. H and r block login 100,000 4. H and r block login Divide line 2 by line 3 4. H and r block login 0 5. H and r block login Limited taxable amount. H and r block login Multiply line 1 by line 4. H and r block login Enter this amount on Form 1040NR, line 17b 5. H and r block login 0 Example 2. H and r block login You are a nonresident alien who performed services for the U. H and r block login S. H and r block login Government as a nonresident alien both within the United States and abroad. H and r block login You retired and began to receive a monthly annuity of $240. H and r block login Your total basic pay for your services for the U. H and r block login S. H and r block login Government was $120,000; $40,000 was for work done in the United States and $80,000 was for your work done in a foreign country. H and r block login The part of your total basic pay for your work done in a foreign country was tax exempt because it was not U. H and r block login S. H and r block login source income. H and r block login The taxable amount of your annuity figured using Worksheet A in this publication is $1,980. H and r block login You are a nonresident alien, so you figure the limited taxable amount of your annuity using Worksheet C as follows. H and r block login Worksheet C. H and r block login Limited Taxable Amount for Nonresident Alien — Example 2 1. H and r block login Enter the otherwise taxable amount of the CSRS or FERS annuity (from line 9 of Worksheet A or from Forms CSA 1099R or CSF 1099R) or TSP distributions (from Form 1099R) 1. H and r block login $ 1,980 2. H and r block login Enter the total U. H and r block login S. H and r block login Government basic pay other than tax-exempt pay for services performed outside the United States 2. H and r block login 40,000 3. H and r block login Enter the total U. H and r block login S. H and r block login Government basic pay for all services 3. H and r block login 120,000 4. H and r block login Divide line 2 by line 3 4. H and r block login . H and r block login 333 5. H and r block login Limited taxable amount. H and r block login Multiply line 1 by line 4. H and r block login Enter this amount on Form 1040NR, line 17b 5. H and r block login 659 Thrift Savings Plan Generally, all of the money in your TSP account is taxed as ordinary income when you receive it. H and r block login (However, see Roth TSP balance and Uniformed services TSP accounts, next. H and r block login ) This is because neither the contributions to your traditional TSP balance nor its earnings have been included previously in your taxable income. H and r block login The way that you withdraw your account balance determines when you must pay the tax. H and r block login Roth TSP balance. H and r block login   The TSP also offers a Roth TSP option, which allows you to make after-tax contributions into your TSP account. H and r block login This means Roth TSP contributions are included in your income. H and r block login The contribution limits are the same as the traditional TSP. H and r block login You can elect to have part or all of your TSP contributions designated as a Roth TSP. H and r block login Agency contributions will be part of your traditional TSP balance. H and r block login Also, you cannot roll over any portion of your traditional TSP into your Roth TSP. H and r block login   Qualified distributions from your Roth TSP are not included in income. H and r block login This applies to both your cost in the account and income earned on that account. H and r block login A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. H and r block login   For more information, go to the TSP website, www. H and r block login tsp. H and r block login gov, or the TSP Service Office. H and r block login See Publication 575, Pension and Annuity Income, for more information about designated Roth accounts. H and r block login Uniformed services TSP accounts. H and r block login   If you have a uniformed services TSP account that includes contributions from combat zone pay, the distributions attributable to those contributions are tax exempt. H and r block login However, any earnings on those contributions to a traditional TSP balance are subject to tax when they are distributed. H and r block login See Roth TSP balance discussed previously to get more information about Roth contributions. H and r block login The statement you receive from the TSP will separately state the total amount of your distribution and the amount of your taxable distribution for the year. H and r block login You can get more information from the TSP website, www. H and r block login tsp. H and r block login gov, or the TSP Service Office. H and r block login Direct rollover by the TSP. H and r block login   If you ask the TSP to transfer any part of the money in your account, from traditional contributions and its earnings, to a traditional IRA or other qualified retirement plan, the tax on that part is deferred until you receive payments from the traditional IRA or other plan. H and r block login However, see the following Note for a discussion on direct rollovers by the TSP of Roth contributions and its earnings. H and r block login Also, see Rollover Rules , later. H and r block login Direct rollover by the TSP to a Roth IRA. H and r block login   If you ask the TSP to transfer any part of the money in your account, from traditional contributions and its earnings, to a Roth IRA, the amount transferred will be taxed in the current year. H and r block login However, see the following Note for a discussion on direct rollovers by the TSP of Roth contributions and its earnings. H and r block login Also, see Rollovers to Roth IRAs for more information, later. H and r block login Note. H and r block login A direct rollover of your Roth contributions and its earnings (if certain conditions are met, see Roth TSP balance , earlier) in your TSP account to a Roth 401(k), Roth 403(b), Roth 457(b), or Roth IRA are not subject to tax when they are transferred or when you receive payments from those accounts at a later date. H and r block login This is because you already paid tax on those contributions. H and r block login You cannot rollover Roth contributions and its earnings in your TSP account to a traditional IRA. H and r block login TSP annuity. H and r block login   If you ask the TSP to buy an annuity with the money in your account, from traditional contributions and its earnings, the annuity payments are taxed when you receive them. H and r block login The payments are not subject to the additional 10% tax on early distributions, even if you are under age 55 when they begin. H and r block login However, there is no tax on the annuity payments if the annuity is purchased using the money in your account from Roth contributions and its earnings if certain conditions are met. H and r block login See Roth TSP balance , earlier. H and r block login This is because you already paid tax on those contributions. H and r block login Cash withdrawals. H and r block login   If you withdraw any of the money in your TSP account, from traditional contributions and its earnings, it is generally taxed as ordinary income when you receive it unless you roll it over into a traditional IRA or other qualified plan. H and r block login (See Rollover Rules , later. H and r block login ) If you receive your entire TSP account balance in a single tax year, you may be able to use the 10-year tax option to figure your tax. H and r block login See Lump-Sum Distributions in Publication 575 for details. H and r block login However, there is no tax if you withdraw money in your TSP account from Roth contributions and its earnings if certain conditions are met. H and r block login See Roth TSP balance , earlier. H and r block login    To qualify for the 10-year tax option, the plan participant must have been born before January 2, 1936. H and r block login   If you receive a single payment or you choose to receive your account balance in monthly payments over a period of less than 10 years, the TSP generally must withhold 20% for federal income tax. H and r block login If you choose to receive your account balance in monthly payments over a period of 10 or more years or a period based on your life expectancy, the payments are subject to withholding as if you are married with three withholding allowances, unless you submit a withholding certificate. H and r block login See also Withholding from Thrift Savings Plan payments earlier under Tax Withholding and Estimated Tax in Part I. H and r block login However, there is no withholding requirement for amounts withdrawn from your TSP account that is from Roth contributions and its earnings, if certain conditions are met. H and r block login See Roth TSP balance , earlier, for a discussion of those conditions. H and r block login Tax on early distributions. H and r block login   Any money paid to you from your TSP account before you reach age 59½ may be subject to an additional 10% tax on early distributions. H and r block login However, this additional tax does not apply in certain situations, including any of the following. H and r block login You receive the distribution and separate from government service during or after the calendar year in which you reach age 55. H and r block login You choose to receive your account balance in monthly payments based on your life expectancy. H and r block login You are totally and permanently disabled. H and r block login You receive amounts from your Roth contributions since that represents a return of your cost (after-tax money). H and r block login The earnings may be subject to the 10% tax depending on whether you met certain conditions. H and r block login See Roth TSP balance , earlier. H and r block login   For more information, see Tax on Early Distributions in Publication 575. H and r block login Outstanding loan. H and r block login   If the TSP declares a distribution from your account because money you borrowed has not been repaid when you separate from government service, your account is reduced and the amount of the distribution (your unpaid loan balance and any unpaid interest), from traditional contributions and its earnings, is taxed in the year declared. H and r block login The distribution also may be subject to the additional 10% tax on early distributions. H and r block login However, the tax will be deferred if you make a rollover contribution to a traditional IRA or other qualified plan equal to the declared distribution amount. H and r block login See Rollover Rules , later. H and r block login   If you withdraw any money from your TSP account in that same year, the TSP must withhold income tax of 20% of the total of the declared distribution and the amount withdrawn. H and r block login However, no withholding is required for portions of the distribution that is from Roth contributions and its earnings, if certain conditions are met. H and r block login See Roth TSP balance , earlier. H and r block login More information. H and r block login   For more information about the TSP, see Summary of the Thrift Savings Plan, distributed to all federal employees. H and r block login Also, see Important Tax Information About Payments From Your TSP Account and Special Tax Withholding Rules for Thrift Savings Plan Payments to Nonresident Aliens, which are available from your agency personnel office or from the TSP by calling 1-TSP-YOU-FIRST (1-877-968-3778) and for participants who are deaf, hard of hearing, or have a speech disability, call 1-TSP-THRIFT5 (1-877-847-4385). H and r block login    The above documents are also available on the TSP website at www. H and r block login tsp. H and r block login gov. H and r block login Select “Forms & Publications. H and r block login ” Rollover Rules Generally, a rollover is a tax-free withdrawal of cash or other assets from one qualified retirement plan or traditional IRA and its reinvestment in another qualified retirement plan or traditional IRA. H and r block login You do not include the amount rolled over in your income, and you cannot take a deduction for it. H and r block login The amount rolled over is taxed later as the new program pays that amount to you. H and r block login If you roll over amounts into a traditional IRA, later distributions of these amounts from the traditional IRA do not qualify for the capital gain or the 10-year tax option. H and r block login However, capital gain treatment or the 10-year tax option will be restored if the traditional IRA contains only amounts rolled over from a qualified plan and these amounts are rolled over from the traditional IRA into a qualified retirement plan. H and r block login To qualify for the capital gain treatment or 10-year tax option, the plan participant must have been born before January 2, 1936. H and r block login You can also roll over a distribution from a qualified retirement plan into a Roth IRA. H and r block login Although the transfer of a distribution into a Roth IRA is considered a rollover for Roth IRA purposes, it is not a tax-free transfer unless you are rolling over amounts from Roth contributions and its earnings. H and r block login See Rollovers to Roth IRAs , later, for more information. H and r block login Qualified retirement plan. H and r block login   For this purpose, a qualified retirement plan generally is: A qualified employee plan, A qualified employee annuity, A tax-sheltered annuity plan (403(b) plan), or An eligible state or local government section 457 deferred compensation plan. H and r block login The CSRS, FERS, and TSP are considered qualified retirement plans. H and r block login Distributions eligible for rollover treatment. H and r block login   If you receive a refund of your CSRS or FERS contributions when you leave government service, you can roll over any interest you receive on the contributions. H and r block login You cannot roll over any part of your CSRS or FERS annuity payments. H and r block login   You can roll over a distribution of any part of your TSP account balance except: A distribution of your account balance that you choose to receive in monthly payments over: Your life expectancy, The joint life expectancies of you and your beneficiary, or A period of 10 years or more, A required minimum distribution generally beginning at age 70½, A declared distribution because of an unrepaid loan, if you have not separated from government service (see Outstanding loan under Thrift Savings Plan, earlier), or A hardship distribution. H and r block login   In addition, a distribution to your beneficiary generally is not treated as an eligible rollover distribution. H and r block login However, see Qualified domestic relations order (QDRO) and Rollovers by surviving spouse , and Rollovers by nonspouse beneficiary , later. H and r block login Direct rollover option. H and r block login   You can choose to have the OPM or TSP transfer any part of an eligible rollover distribution directly to another qualified retirement plan that accepts rollover distributions or to a traditional IRA or Roth IRA. H and r block login   There is an automatic rollover requirement for mandatory distributions. H and r block login A mandatory distribution is a distribution made without your consent and before you reach age 62 or normal retirement age, whichever is later. H and r block login The automatic rollover requirement applies if the distribution is more than $1,000 and is an eligible rollover distribution. H and r block login You can choose to have the distribution paid directly to you or rolled over directly to your traditional or Roth IRA or another qualified retirement plan. H and r block login If you do not make this choice, OPM will automatically roll over the distribution into an IRA of a designated trustee or issuer. H and r block login No tax withheld. H and r block login   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. H and r block login However, if the rollover is to a Roth IRA, you may want to choose to have tax withheld since any amount rolled over is generally included in income. H and r block login Any part of the eligible rollover distribution paid to you is subject to withholding at a 20% rate. H and r block login Direct roll over amounts from Roth contributions and its earnings do not have tax withheld because you already paid tax on those amounts. H and r block login Payment to you option. H and r block login   If an eligible rollover distribution is paid to you, the OPM or TSP must withhold 20% for income tax even if you plan to roll over the distribution to another qualified retirement plan, traditional or Roth IRA. H and r block login However, the full amount is treated as distributed to you even though you actually receive only 80%. H and r block login 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 IRA. H and r block login Rollovers to Roth IRAs are generally included in income. H and r block login Eligible rollover distributions that are from Roth contributions do not have tax withheld because you already paid tax on those amounts. H and r block login If you leave government service before the calendar year in which you reach age 55 and are under age 59½ when a distribution is paid to you, you may have to pay an additional 10% tax on any part, including any tax withheld, that you do not roll over. H and r block login However, distributions from Roth contributions will not be subject to the 10% additional tax because it is a return of your cost (after-tax money). H and r block login Earnings from those contributions may be subject to the 10% additional tax if certain conditions are not met. H and r block login See Roth TSP balance , earlier. H and r block login Also, see Tax on Early Distributions in Publication 575. H and r block login Exception to withholding. H and r block login   Withholding from an eligible rollover distribution paid to you is not required if the distributions for your tax year total less than $200. H and r block login Partial rollovers. H and r block login   A lump-sum distribution may qualify for capital gain treatment or the 10-year tax option if the plan participant was born before January 2, 1936. H and r block login See Lump-Sum Distributions in Publication 575. H and r block login However, if you roll over any part of the distribution, the part you keep does not qualify for this special tax treatment. H and r block login Rolling over more than amount received. H and r block login   If you want to roll over more of an eligible rollover distribution than the amount you received after income tax was withheld, you will have to add funds from some other source (such as your savings or borrowed amounts). H and r block login Example. H and r block login You left government service at age 53. H and r block login On February 1, 2013, you receive an eligible rollover distribution of $10,000 from you