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Tax Amendment

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Tax Amendment

Tax amendment Publication 575 - Main Content Table of Contents General InformationPension. Tax amendment Annuity. Tax amendment Qualified employee plan. Tax amendment Qualified employee annuity. Tax amendment Designated Roth account. Tax amendment Tax-sheltered annuity plan. Tax amendment Fixed-period annuities. Tax amendment Annuities for a single life. Tax amendment Joint and survivor annuities. Tax amendment Variable annuities. Tax amendment Disability pensions. Tax amendment Variable Annuities Section 457 Deferred Compensation Plans Disability Pensions Insurance Premiums for Retired Public Safety Officers Railroad Retirement Benefits Withholding Tax and Estimated Tax Cost (Investment in the Contract)Foreign employment contributions while a nonresident alien. Tax amendment Taxation of Periodic PaymentsPeriod of participation. Tax amendment Fully Taxable Payments Partly Taxable Payments Taxation of Nonperiodic PaymentsFiguring the Taxable Amount Loans Treated as Distributions Transfers of Annuity Contracts Lump-Sum Distributions RolloversExceptions. Tax amendment No tax withheld. Tax amendment Partial rollovers. Tax amendment Frozen deposits. Tax amendment Reasonable period of time. Tax amendment 20% Mandatory withholding. Tax amendment How to report. Tax amendment How to report. Tax amendment Special rule for Roth IRAs and designated Roth accounts. Tax amendment Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. Tax amendment How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. Tax amendment   Some of the terms used in this publication are defined in the following paragraphs. Tax amendment Pension. Tax amendment   A pension is generally a series of definitely determinable payments made to you after you retire from work. Tax amendment Pension payments are made regularly and are based on such factors as years of service and prior compensation. Tax amendment Annuity. Tax amendment   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. Tax amendment They can be either fixed (under which you receive a definite amount) or variable (not fixed). Tax amendment You can buy the contract alone or with the help of your employer. Tax amendment Qualified employee plan. Tax amendment   A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries and that meets Internal Revenue Code requirements. Tax amendment It qualifies for special tax benefits, such as tax deferral for employer contributions and capital gain treatment or the 10-year tax option for lump-sum distributions (if participants qualify). Tax amendment To determine whether your plan is a qualified plan, check with your employer or the plan administrator. Tax amendment Qualified employee annuity. Tax amendment   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Tax amendment Designated Roth account. Tax amendment   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. Tax amendment Elective deferrals that are designated as Roth contributions are included in your income. Tax amendment However, qualified distributions (explained later) are not included in your income. Tax amendment You should check with your plan administrator to determine if your plan will accept designated Roth contributions. Tax amendment Tax-sheltered annuity plan. Tax amendment   A tax-sheltered annuity plan (often referred to as a 403(b) plan or a tax-deferred annuity plan) is a retirement plan for employees of public schools and certain tax-exempt organizations. Tax amendment Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. Tax amendment Types of pensions and annuities. Tax amendment   Pensions and annuities include the following types. Tax amendment Fixed-period annuities. Tax amendment   You receive definite amounts at regular intervals for a specified length of time. Tax amendment Annuities for a single life. Tax amendment   You receive definite amounts at regular intervals for life. Tax amendment The payments end at death. Tax amendment Joint and survivor annuities. Tax amendment   The first annuitant receives a definite amount at regular intervals for life. Tax amendment After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Tax amendment The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Tax amendment Variable annuities. Tax amendment   You receive payments that may vary in amount for a specified length of time or for life. Tax amendment The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds, cost-of-living indexes, or earnings from a mutual fund. Tax amendment Disability pensions. Tax amendment   You receive disability payments because you retired on disability and have not reached minimum retirement age. Tax amendment More than one program. Tax amendment   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. Tax amendment If you participate in more than one program, you may have to treat each as a separate pension or annuity contract, depending upon the facts in each case. Tax amendment Also, you may be considered to have received more than one pension or annuity. Tax amendment Your former employer or the plan administrator should be able to tell you if you have more than one contract. Tax amendment Example. Tax amendment Your employer set up a noncontributory profit-sharing plan for its employees. Tax amendment The plan provides that the amount held in the account of each participant will be paid when that participant retires. Tax amendment Your employer also set up a contributory defined benefit pension plan for its employees providing for the payment of a lifetime pension to each participant after retirement. Tax amendment The amount of any distribution from the profit-sharing plan depends on the contributions (including allocated forfeitures) made for the participant and the earnings from those contributions. Tax amendment Under the pension plan, however, a formula determines the amount of the pension benefits. Tax amendment The amount of contributions is the amount necessary to provide that pension. Tax amendment Each plan is a separate program and a separate contract. Tax amendment If you get benefits from these plans, you must account for each separately, even though the benefits from both may be included in the same check. Tax amendment Distributions from a designated Roth account are treated separately from other distributions from the plan. Tax amendment Qualified domestic relations order (QDRO). Tax amendment   A QDRO is a judgment, decree, or order relating to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of a participant in a retirement plan. Tax amendment The QDRO must contain certain specific information, such as the name and last known mailing address of the participant and each alternate payee, and the amount or percentage of the participant's benefits to be paid to each alternate payee. Tax amendment A QDRO may not award an amount or form of benefit that is not available under the plan. Tax amendment   A spouse or former spouse who receives part of the benefits from a retirement plan under a QDRO reports the payments received as if he or she were a plan participant. Tax amendment The spouse or former spouse is allocated a share of the participant's cost (investment in the contract) equal to the cost times a fraction. Tax amendment The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. Tax amendment The denominator is the present value of all benefits payable to the participant. Tax amendment   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. Tax amendment Variable Annuities The tax rules in this publication apply both to annuities that provide fixed payments and to annuities that provide payments that vary in amount based on investment results or other factors. Tax amendment For example, they apply to commercial variable annuity contracts, whether bought by an employee retirement plan for its participants or bought directly from the issuer by an individual investor. Tax amendment Under these contracts, the owner can generally allocate the purchase payments among several types of investment portfolios or mutual funds and the contract value is determined by the performance of those investments. Tax amendment The earnings are not taxed until distributed either in a withdrawal or in annuity payments. Tax amendment The taxable part of a distribution is treated as ordinary income. Tax amendment Net investment income tax. Tax amendment   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). Tax amendment For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. Tax amendment For information on the tax treatment of a transfer or exchange of a variable annuity contract, see Transfers of Annuity Contracts under Taxation of Nonperiodic Payments, later. Tax amendment Withdrawals. Tax amendment   If you withdraw funds before your annuity starting date and your annuity is under a qualified retirement plan, a ratable part of the amount withdrawn is tax free. Tax amendment The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. Tax amendment   If your annuity is under a nonqualified plan (including a contract you bought directly from the issuer), the amount withdrawn is allocated first to earnings (the taxable part) and then to your cost (the tax-free part). Tax amendment However, if you bought your annuity contract before August 14, 1982, a different allocation applies to the investment before that date and the earnings on that investment. Tax amendment To the extent the amount withdrawn does not exceed that investment and earnings, it is allocated first to your cost (the tax-free part) and then to earnings (the taxable part). Tax amendment   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. Tax amendment   The amount you receive in a full surrender of your annuity contract at any time is tax free to the extent of any cost that you have not previously recovered tax free. Tax amendment The rest is taxable. Tax amendment   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. Tax amendment If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. Tax amendment Annuity payments. Tax amendment   If you receive annuity payments under a variable annuity plan or contract, you recover your cost tax free under either the Simplified Method or the General Rule, as explained under Taxation of Periodic Payments , later. Tax amendment For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. Tax amendment For a variable annuity paid under a nonqualified plan (including a contract you bought directly from the issuer), you must use a special computation under the General Rule. Tax amendment For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. Tax amendment Death benefits. Tax amendment    If you receive a single-sum distribution from a variable annuity contract because of the death of the owner or annuitant, the distribution is generally taxable only to the extent it is more than the unrecovered cost of the contract. Tax amendment If you choose to receive an annuity, the payments are subject to tax as described above. Tax amendment If the contract provides a joint and survivor annuity and the primary annuitant had received annuity payments before death, you figure the tax-free part of annuity payments you receive as the survivor in the same way the primary annuitant did. Tax amendment See Survivors and Beneficiaries , later. Tax amendment Section 457 Deferred Compensation Plans If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. Tax amendment If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. Tax amendment You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. Tax amendment You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. Tax amendment Your 457(b) plan may have a designated Roth account option. Tax amendment If so, you may be able to roll over amounts to the designated Roth account or make contributions. Tax amendment Elective deferrals to a designated Roth account are included in your income. Tax amendment Qualified distributions (explained later) are not included in your income. Tax amendment See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. Tax amendment This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. Tax amendment For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. Tax amendment Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. Tax amendment Plans that are not eligible section 457 plans include the following: Bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plans. Tax amendment Nonelective deferred compensation plans for nonemployees (independent contractors). Tax amendment Deferred compensation plans maintained by churches. Tax amendment Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. Tax amendment An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. Tax amendment Disability Pensions If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. Tax amendment You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. Tax amendment Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Tax amendment You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Tax amendment For information on this credit, see Publication 524. Tax amendment Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Tax amendment Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. Tax amendment Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. Tax amendment For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. Tax amendment Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. Tax amendment The premiums can be for coverage for you, your spouse, or dependents. Tax amendment The distribution must be made directly from the plan to the insurance provider. Tax amendment You can exclude from income the smaller of the amount of the insurance premiums or $3,000. Tax amendment You can only make this election for amounts that would otherwise be included in your income. Tax amendment The amount excluded from your income cannot be used to claim a medical expense deduction. Tax amendment An eligible retirement plan is a governmental plan that is: a qualified trust, a section 403(a) plan, a section 403(b) annuity, or a section 457(b) plan. Tax amendment If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. Tax amendment The amount shown in box 2a of Form 1099-R does not reflect this exclusion. Tax amendment Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Tax amendment Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Tax amendment Enter “PSO” next to the appropriate line on which you report the taxable amount. Tax amendment If you are retired on disability and reporting your disability pension on line 7 of Form 1040 or Form 1040A, or line 8 of Form 1040NR, include only the taxable amount on that line and enter “PSO” and the amount excluded on the dotted line next to the applicable line. Tax amendment Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. Tax amendment These categories are treated differently for income tax purposes. Tax amendment The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. Tax amendment This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and you treat it for tax purposes like social security benefits. Tax amendment If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2013, you will receive Form RRB-1099, Payments by the Railroad Retirement Board (or Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, if you are a nonresident alien) from the U. Tax amendment S. Tax amendment Railroad Retirement Board (RRB). Tax amendment For more information about the tax treatment of the SSEB portion of tier 1 benefits and Forms RRB-1099 and RRB-1042S, see Publication 915. Tax amendment The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). Tax amendment It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Tax amendment Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. Tax amendment This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. Tax amendment (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. Tax amendment ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. Tax amendment See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. Tax amendment Form RRB-1099-R is used for U. Tax amendment S. Tax amendment citizens, resident aliens, and nonresident aliens. Tax amendment Nonresident aliens. Tax amendment   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. Tax amendment Nonresident aliens are subject to mandatory U. Tax amendment S. Tax amendment tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. Tax amendment A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. Tax amendment See Tax withholding next for more information. Tax amendment   If you are a nonresident alien and your tax withholding rate changed or your country of legal residence changed during the year, you may receive more than one Form RRB-1042S or Form RRB-1099-R. Tax amendment To determine your total benefits paid or repaid and total tax withheld for the year, you should add the amounts shown on all forms you received for that year. Tax amendment For information on filing requirements for aliens, see Publication 519, U. Tax amendment S. Tax amendment Tax Guide for Aliens. Tax amendment For information on tax treaties between the United States and other countries that may reduce or eliminate U. Tax amendment S. Tax amendment tax on your benefits, see Publication 901, U. Tax amendment S. Tax amendment Tax Treaties. Tax amendment Tax withholding. Tax amendment   To request or change your income tax withholding from SSEB payments, U. Tax amendment S. Tax amendment citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. Tax amendment To elect, revoke, or change your income tax withholding from NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments. Tax amendment If you are a nonresident alien or a U. Tax amendment S. Tax amendment citizen living abroad, you should provide Form RRB-1001, Nonresident Questionnaire, to the RRB to furnish citizenship and residency information and to claim any treaty exemption from U. Tax amendment S. Tax amendment tax withholding. Tax amendment Nonresident U. Tax amendment S. Tax amendment citizens cannot elect to be exempt from withholding on payments delivered outside of the U. Tax amendment S. Tax amendment Help from the RRB. Tax amendment   To request an RRB form or to get help with questions about an RRB benefit, you should contact your nearest RRB field office if you reside in the United States (call 1-877-772-5772 for the nearest field office) or U. Tax amendment S. Tax amendment consulate/Embassy if you reside outside the United States. Tax amendment You can visit the RRB on the Internet at www. Tax amendment rrb. Tax amendment gov. Tax amendment Form RRB-1099-R. Tax amendment   The following discussion explains the items shown on Form RRB-1099-R. Tax amendment The amounts shown on this form are before any deduction for: Federal income tax withholding, Medicare premiums, Legal process garnishment payments, Recovery of a prior year overpayment of an NSSEB, tier 2 benefit, VDB, or supplemental annuity benefit, or Recovery of Railroad Unemployment Insurance Act benefits received while awaiting payment of your railroad retirement annuity. Tax amendment   The amounts shown on this form are after any offset for: Social Security benefits, Age reduction, Public Service pensions or public disability benefits, Dual railroad retirement entitlement under another RRB claim number, Work deductions, Legal process partition deductions, Actuarial adjustment, Annuity waiver, or Recovery of a current-year overpayment of NSSEB, tier 2, VDB, or supplemental annuity benefits. Tax amendment   The amounts shown on Form RRB-1099-R do not reflect any special rules, such as capital gain treatment or the special 10-year tax option for lump-sum payments, or tax-free rollovers. Tax amendment To determine if any of these rules apply to your benefits, see the discussions about them later. Tax amendment   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. Tax amendment Use distribution code “7” if you are asked for a distribution code. Tax amendment Distribution codes are not shown on Form RRB-1099-R. Tax amendment   There are three copies of this form. Tax amendment Copy B is to be included with your income tax return if federal income tax is withheld. Tax amendment Copy C is for your own records. Tax amendment Copy 2 is filed with your state, city, or local income tax return, when required. Tax amendment See the illustrated Copy B (Form RRB-1099-R) above. Tax amendment       Each beneficiary will receive his or her own Form RRB-1099-R. Tax amendment If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. Tax amendment So that you get your form timely, make sure the RRB always has your current mailing address. Tax amendment Please click here for the text description of the image. Tax amendment Form RRB-1099-R Box 1—Claim Number and Payee Code. Tax amendment   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. Tax amendment This is the number under which the RRB paid your benefits. Tax amendment Your payee code follows your claim number and is the last number in this box. Tax amendment It is used by the RRB to identify you under your claim number. Tax amendment In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. Tax amendment Box 2—Recipient's Identification Number. Tax amendment   This is the recipient's U. Tax amendment S. Tax amendment taxpayer identification number. Tax amendment It is the social security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN), if known, for the person or estate listed as the recipient. Tax amendment If you are a resident or nonresident alien who must furnish a taxpayer identification number to the IRS and are not eligible to obtain an SSN, use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN. Tax amendment The Instructions for Form W-7 explain how and when to apply. Tax amendment Box 3—Employee Contributions. Tax amendment   This is the amount of taxes withheld from the railroad employee's earnings that exceeds the amount of taxes that would have been withheld had the earnings been covered under the social security system. Tax amendment This amount is the employee's cost that you use to figure the tax-free part of the NSSEB and tier 2 benefit you received (the amount shown in box 4). Tax amendment (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. Tax amendment ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. Tax amendment It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. Tax amendment If this amount has changed, the change is retroactive. Tax amendment You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. Tax amendment If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. Tax amendment    If you had a previous annuity entitlement that ended and you are figuring the tax-free part of your NSSEB/tier 2 benefit for your current annuity entitlement, you should contact the RRB for confirmation of your correct employee contribution amount. Tax amendment Box 4—Contributory Amount Paid. Tax amendment   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. Tax amendment (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Tax amendment ) This amount is the total contributory pension paid in 2013. Tax amendment It may be partly taxable and partly tax free or fully taxable. Tax amendment If you determine you are eligible to compute a tax-free part as explained later in Partly Taxable Payments under Taxation of Periodic Payments, use the latest reported employee contribution amount shown in box 3 as the cost. Tax amendment Box 5—Vested Dual Benefit. Tax amendment   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. Tax amendment It is fully taxable. Tax amendment VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Tax amendment Note. Tax amendment The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. Tax amendment Box 6—Supplemental Annuity. Tax amendment   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. Tax amendment It is fully taxable. Tax amendment Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Tax amendment Box 7—Total Gross Paid. Tax amendment   This is the sum of boxes 4, 5, and 6. Tax amendment The amount represents the total pension paid in 2013. Tax amendment Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Tax amendment Box 8—Repayments. Tax amendment   This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2013 for years before 2013 or for unknown years. Tax amendment The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. Tax amendment It only includes repayments of benefits that were taxable to you. Tax amendment This means it only includes repayments in 2013 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. Tax amendment If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. Tax amendment For more information about repayments, see Repayment of benefits received in an earlier year , later. Tax amendment    You may have repaid an overpayment of benefits by returning a payment, by making a payment, or by having an amount withheld from your railroad retirement annuity payment. Tax amendment Box 9—Federal Income Tax Withheld. Tax amendment   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. Tax amendment Include this on your income tax return as tax withheld. Tax amendment If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2013, you will receive more than one Form RRB-1099-R for 2013. Tax amendment Determine the total amount of U. Tax amendment S. Tax amendment federal income tax withheld from your 2013 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2013 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive. Tax amendment Box 10—Rate of Tax. Tax amendment   If you are taxed as a U. Tax amendment S. Tax amendment citizen or resident alien, this box does not apply to you. Tax amendment If you are a nonresident alien, an entry in this box indicates the rate at which tax was withheld on the NSSEB, tier 2, VDB, and supplemental annuity payments that were paid to you in 2013. Tax amendment If you are a nonresident alien whose tax was withheld at more than one rate during 2013, you will receive a separate Form RRB-1099-R for each rate change during 2013. Tax amendment Box 11—Country. Tax amendment   If you are taxed as a U. Tax amendment S. Tax amendment citizen or resident alien, this box does not apply to you. Tax amendment If you are a nonresident alien, an entry in this box indicates the country of which you were a resident for tax purposes at the time you received railroad retirement payments in 2013. Tax amendment If you are a nonresident alien who was a resident of more than one country during 2013, you will receive a separate Form RRB-1099-R for each country of residence during 2013. Tax amendment Box 12—Medicare Premium Total. Tax amendment   This is for information purposes only. Tax amendment The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. Tax amendment Medicare premium refunds are not included in the Medicare total. Tax amendment The Medicare total is normally shown on Form RRB-1099 (if you are a citizen or resident alien of the United States) or Form RRB-1042S (if you are a nonresident alien). Tax amendment However, if Form RRB-1099 or Form RRB-1042S is not required for 2013, then this total will be shown on Form RRB-1099-R. Tax amendment If your Medicare premiums were deducted from your social security benefits, paid by a third party, refunded to you, and/or you paid the premiums by direct billing, your Medicare total will not be shown in this box. Tax amendment Repayment of benefits received in an earlier year. Tax amendment   If you had to repay any railroad retirement benefits that you had included in your income in an earlier year because at that time you thought you had an unrestricted right to it, you can deduct the amount you repaid in the year in which you repaid it. Tax amendment   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. Tax amendment The 2%-of-adjusted-gross-income limit applies to this deduction. Tax amendment You cannot take this deduction if you file Form 1040A. Tax amendment    If you repaid more than $3,000 in 2013, you can either take a deduction for the amount repaid on Schedule A (Form 1040), line 28 or you can take a credit against your tax. Tax amendment For more information, see Repayments in Publication 525. Tax amendment Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. Tax amendment However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. Tax amendment (These are distributions, described later under Rollovers, that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. Tax amendment ) 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. Tax amendment See Estimated tax , later. Tax amendment The withholding rules apply to the taxable part of payments you receive from: An employer pension, annuity, profit-sharing, or stock bonus plan, Any other deferred compensation plan, A traditional individual retirement arrangement (IRA), or A commercial annuity. Tax amendment For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. Tax amendment There will be no withholding on any part of a distribution where it is reasonable to believe that it will not be includible in gross income. Tax amendment Choosing no withholding. Tax amendment   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. Tax amendment You can make this choice on Form W-4P for periodic and nonperiodic payments. Tax amendment This choice generally remains in effect until you revoke it. Tax amendment   The payer will ignore your choice not to have tax withheld if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer, before the payment is made, that you gave an incorrect social security number. Tax amendment   To choose not to have tax withheld, a U. Tax amendment S. Tax amendment citizen or resident alien must give the payer a home address in the United States or its possessions. Tax amendment Without that address, the payer must withhold tax. Tax amendment For example, the payer has to withhold tax if the recipient has provided a U. Tax amendment S. Tax amendment address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. Tax amendment S. Tax amendment home address. Tax amendment   If you do not give the payer a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to the payer that you are not a U. Tax amendment S. Tax amendment citizen, a U. Tax amendment S. Tax amendment resident alien, or someone who left the country to avoid tax. Tax amendment But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. Tax amendment This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. Tax amendment For details, get Publication 519. Tax amendment Periodic payments. Tax amendment   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. Tax amendment Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Tax amendment You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). Tax amendment If you do not, tax will be withheld as if you were married and claiming three withholding allowances. Tax amendment   Tax will be withheld as if you were single and were claiming no withholding allowances if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer (before any payment is made) that you gave an incorrect social security number. Tax amendment   You must file a new withholding certificate to change the amount of withholding. Tax amendment Nonperiodic distributions. Tax amendment    Unless you choose no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. Tax amendment You can also ask the payer to withhold an additional amount using Form W-4P. Tax amendment The part of any loan treated as a distribution (except an offset amount to repay the loan), explained later, is subject to withholding under this rule. Tax amendment Eligible rollover distribution. Tax amendment    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. Tax amendment You cannot choose not to have tax withheld from an eligible rollover distribution. Tax amendment However, tax will not be withheld if you have the plan administrator pay the eligible rollover distribution directly to another qualified plan or an IRA in a direct rollover. Tax amendment For more information about eligible rollover distributions, see Rollovers , later. Tax amendment Estimated tax. Tax amendment   Your estimated tax is the total of your expected income tax, self-employment tax, and certain other taxes for the year, minus your expected credits and withheld tax. Tax amendment Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 return, or 100% of the tax shown on your 2013 return. Tax amendment If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. Tax amendment For more information, get Publication 505, Tax Withholding and Estimated Tax. Tax amendment In figuring your withholding or estimated tax, remember that a part of your monthly social security or equivalent tier 1 railroad retirement benefits may be taxable. Tax amendment See Publication 915. Tax amendment You can choose to have income tax withheld from those benefits. Tax amendment Use Form W-4V to make this choice. Tax amendment Cost (Investment in the Contract) Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). Tax amendment If any part of a distribution is treated as a recovery of your cost under the rules explained in this publication, that part is tax free. Tax amendment Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. Tax amendment In general, your cost is your net investment in the contract as of the annuity starting date (or the date of the distribution, if earlier). Tax amendment To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. Tax amendment This includes the amounts your employer contributed that were taxable to you when paid. Tax amendment (However, see Foreign employment contributions , later. Tax amendment ) It does not include amounts withheld from your pay on a tax-deferred basis (money that was taken out of your gross pay before taxes were deducted). Tax amendment It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). Tax amendment From this total cost you must subtract the following amounts. Tax amendment Any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income and that you received by the later of the annuity starting date or the date on which you received your first payment. Tax amendment Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). Tax amendment If you must use the Simplified Method for your annuity payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. Tax amendment (See Simplified Method , later, for information on its required use. Tax amendment ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. Tax amendment (See General Rule , later, for information on its use. Tax amendment ) Your annuity contract has a refund feature if the annuity payments are for your life (or the lives of you and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated amount or a stated number of payments are made. Tax amendment For more information, see Publication 939. Tax amendment The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . Tax amendment Form 1099-R. Tax amendment If you began receiving periodic payments of a life annuity in 2013, the payer should show your total contributions to the plan in box 9b of your 2013 Form 1099-R. Tax amendment Annuity starting date defined. Tax amendment   Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. Tax amendment Example. Tax amendment On January 1, you completed all your payments required under an annuity contract providing for monthly payments starting on August 1 for the period beginning July 1. Tax amendment The annuity starting date is July 1. Tax amendment This is the date you use in figuring the cost of the contract and selecting the appropriate number from Table 1 for line 3 of the Simplified Method Worksheet. Tax amendment Designated Roth accounts. Tax amendment   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. Tax amendment Your cost will also include any in-plan Roth rollovers you included in income. Tax amendment Foreign employment contributions. Tax amendment   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Tax amendment The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (not including the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) but only if the contributions would be excludible from your gross income had they been paid directly to you. Tax amendment Foreign employment contributions while a nonresident alien. Tax amendment   In determining your cost, special rules apply if you are a U. Tax amendment S. Tax amendment citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. Tax amendment Your contributions and your employer's contributions are not included in your cost if the contribution: Was made based on compensation which was for services performed outside the United States while you were a nonresident alien, and Was not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if paid as cash compensation when the services were performed. Tax amendment Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. Tax amendment Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Tax amendment These payments are also known as amounts received as an annuity. Tax amendment If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. Tax amendment In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. Tax amendment The amount of each payment that is more than the part that represents your cost is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Tax amendment Designated Roth accounts. Tax amendment   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. Tax amendment This applies to both your cost in the account and income earned on that account. Tax amendment 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. Tax amendment   If the distribution is not a qualified distribution, the rules discussed in this section apply. Tax amendment The designated Roth account is treated as a separate contract. Tax amendment Period of participation. Tax amendment   The 5-tax-year period of participation is the 5-tax-year period beginning with the first tax year for which the participant made a designated Roth contribution to the plan. Tax amendment Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. Tax amendment   However, if a direct rollover is made to the plan from a designated Roth account under another plan, the 5-tax-year period for the recipient plan begins with the first tax year for which the participant first had designated Roth contributions made to the other plan. Tax amendment   Your 401(k), 403(b), or 457(b) plan may permit you to roll over amounts from those plans to a designated Roth account within the same plan. Tax amendment This is known as an in-plan Roth rollover. Tax amendment For more details, see In-plan Roth rollovers , later. Tax amendment Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no cost in the contract because any of the following situations applies to you (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Tax amendment You did not pay anything or are not considered to have paid anything for your pension or annuity. Tax amendment Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. Tax amendment Your employer did not withhold contributions from your salary. Tax amendment You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). Tax amendment Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. Tax amendment You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Tax amendment Deductible voluntary employee contributions. Tax amendment   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. Tax amendment Accumulated deductible voluntary employee contributions include net earnings on the contributions. Tax amendment If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. Tax amendment Partly Taxable Payments If you have a cost to recover from your pension or annuity plan (see Cost (Investment in the Contract) , earlier), you can exclude part of each annuity payment from income as a recovery of your cost. Tax amendment This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. Tax amendment The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Tax amendment You figure the tax-free part of the payment using one of the following methods. Tax amendment Simplified Method. Tax amendment You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). Tax amendment You cannot use this method if your annuity is paid under a nonqualified plan. Tax amendment General Rule. Tax amendment You must use this method if your annuity is paid under a nonqualified plan. Tax amendment You generally cannot use this method if your annuity is paid under a qualified plan. Tax amendment You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. Tax amendment If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. Tax amendment Qualified plan annuity starting before November 19, 1996. Tax amendment   If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract) ) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. Tax amendment If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. Tax amendment If you used the Three-Year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable. Tax amendment Exclusion limit. Tax amendment   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. Tax amendment Once your annuity starting date is determined, it does not change. Tax amendment If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. Tax amendment That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. Tax amendment Exclusion limited to cost. Tax amendment   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. Tax amendment Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Tax amendment This deduction is not subject to the 2%-of-adjusted-gross-income limit. Tax amendment Example 1. Tax amendment Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. Tax amendment The total cost of your annuity is $12,000. Tax amendment Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). Tax amendment After that, your annuity payments are generally fully taxable. Tax amendment Example 2. Tax amendment The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. Tax amendment You have recovered tax free only $9,600 (8 × $1,200) of your cost. Tax amendment An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. Tax amendment Exclusion not limited to cost. Tax amendment   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Tax amendment If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. Tax amendment The total exclusion may be more than your cost. Tax amendment Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. Tax amendment For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. Tax amendment For any other annuity, this number is the number of monthly annuity payments under the contract. Tax amendment Who must use the Simplified Method. Tax amendment   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. Tax amendment You receive your pension or annuity payments from any of the following plans. Tax amendment A qualified employee plan. Tax amendment A qualified employee annuity. Tax amendment A tax-sheltered annuity plan (403(b) plan). Tax amendment On your annuity starting date, at least one of the following conditions applies to you. Tax amendment You are under age 75. Tax amendment You are entitled to less than 5 years of guaranteed payments. Tax amendment Guaranteed payments. Tax amendment   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. Tax amendment If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Tax amendment Annuity starting before November 19, 1996. Tax amendment   If your annuity starting date is after July 1, 1986, and before November 19, 1996, and you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. Tax amendment You could have chosen to use the Simplified Method if your annuity is payable for your life (or the lives of you and your survivor annuitant) and you met both of the conditions listed earlier under Who must use the Simplified Method . Tax amendment Who cannot use the Simplified Method. Tax amendment   You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise do not meet the conditions described in the preceding discussion. Tax amendment See General Rule , later. Tax amendment How to use the Simplified Method. Tax amendment    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. Tax amendment Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. Tax amendment   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. Tax amendment How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. Tax amendment For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. Tax amendment    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. Tax amendment Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Tax amendment Single-life annuity. Tax amendment   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Tax amendment Enter on line 3 the number shown for your age on your annuity starting date. Tax amendment This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Tax amendment Multiple-lives annuity. Tax amendment   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Tax amendment Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. Tax amendment For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. Tax amendment For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. Tax amendment Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. Tax amendment   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Tax amendment Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Tax amendment This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Tax amendment Fixed-period annuity. Tax amendment   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. Tax amendment Line 6. Tax amendment   The amount on line 6 should include all amounts that could have been recovered in prior years. Tax amendment If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. Tax amendment Example. Tax amendment Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. Tax amendment Bill's annuity starting date is January 1, 2013. Tax amendment The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. Tax amendment Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Tax amendment Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Tax amendment Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. Tax amendment Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of Worksheet A in completing line 3 of the worksheet. Tax amendment His completed worksheet is shown later. Tax amendment Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Tax amendment Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Tax amendment The full amount of any annuity payments received after 310 payments are paid must be included in gross income. Tax amendment If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Tax amendment This deduction is not subject to the 2%-of-adjusted-gross-income limit. Tax amendment Worksheet A. Tax amendment Simplified Method Worksheet for Bill Smith 1. Tax amendment Enter the total pension or annuity payments received this year. Tax amendment Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Tax amendment $14,400 2. Tax amendment Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. Tax amendment * See Cost (Investment in the Contract) , earlier 2. Tax amendment 31,000   Note. Tax amendment 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). Tax amendment Otherwise, go to line 3. Tax amendment     3. Tax amendment Enter the appropriate number from Table 1 below. Tax amendment But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. Tax amendment 310 4. Tax amendment Divide line 2 by the number on line 3 4. Tax amendment 100 5. Tax amendment Multiply line 4 by the number of months for which this year's payments were made. Tax amendment If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Tax amendment Otherwise, go to line 6 5. Tax amendment 1,200 6. Tax amendment Enter any amount previously recovered tax free in years after 1986. Tax amendment This is the amount shown on line 10 of your worksheet for last year 6. Tax amendment -0- 7. Tax amendment Subtract line 6 from line 2 7. Tax amendment 31,000 8. Tax amendment Enter the smaller of line 5 or line 7 8. Tax amendment 1,200 9. Tax amendment Taxable amount for year. Tax amendment Subtract line 8 from line 1. Tax amendment Enter the result, but not less than zero. Tax amendment Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Tax amendment Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Tax amendment If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. Tax amendment $13,200 10. Tax amendment Was your annuity starting date before 1987? □ Yes. Tax amendment STOP. Tax amendment Do not complete the rest of this worksheet. Tax amendment  ☑ No. Tax amendment Add lines 6 and 8. Tax amendment This is the amount you have recovered tax free through 2013. Tax amendment You will need this number if you need to fill out this worksheet next year 10. Tax amendment 1,200 11. Tax amendment Balance of cost to be recovered. Tax amendment Subtract line 10 from line 2. Tax amendment If zero, you will not have to complete this worksheet next year. Tax amendment The payments you receive next year will generally be fully taxable 11. Tax amendment $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Tax amendment           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. Tax amendment . Tax amendment . Tax amendment BEFORE November 19, 1996, enter on line 3. Tax amendment . Tax amendment . Tax amendment AFTER November 18, 1996, enter on line 3. Tax amendment . Tax amendment . Tax amendment     55 or under 300 360     56-60 260 310     61-65 240 260     66-70 170 210     71 or older 120 160     Table 2 for Line 3 Above     IF the combined ages at  annuity starting date were. Tax amendment . Tax amendment . Tax amendment THEN enter on line 3. Tax amendment . Tax amendment . Tax amendment     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. Tax amendment   If you and one or more other annuitants receive payments at the same time, you exclude from each annuity payment a pro rata share of the monthly tax-free amount. Tax amendment Figure your share by taking the following steps. Tax amendment Complete your worksheet through line 4 to figure the monthly tax-free amount. Tax amendment Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. Tax amendment Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. Tax amendment The result is your share of the monthly tax-free amount. Tax amendment   Replace the amount on line 4 of the worksheet with the result in (3) above. Tax amendment Enter that amount on line 4 of your worksheet each year. Tax amendment General Rule Under the General Rule, you determine the tax-free part of each annuity payment based on the ratio of the cost of the contract to the total expected return. Tax amendment Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Tax amendment To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. Tax amendment Who must use the General Rule. Tax amendment   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. Tax amendment Annuity starting before November 19, 1996. Tax amendment   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. Tax amendment You also had to use it for any fixed-period annuity. Tax amendment If you did not have to use the General Rule, you could have chosen to use it. Tax amendment If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. Tax amendment   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Tax amendment Who cannot use the General Rule. Tax amendment   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. Tax amendment See Simplified Method , earlier. Tax amendment More information. Tax amendment   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. Tax amendment Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. Tax amendment Nonperiodic distributions are also known as amounts not received as an annuity. Tax amendment They include all payments other than periodic payments and corrective distributions. Tax amendment For example, the following items are treated as nonperiodic distributions. Tax amendment Cash withdrawals. Tax amendment Distributions of current earnings (dividends) on your investment. Tax amendment However, do not include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract. Tax amendment Certain loans. Tax amendment See Loans Treated as Distributions , later. Tax amendment The value of annuity contracts transferred without full and adequate consideration. Tax amendment See Transfers of Annuity Contracts , later. Tax amendment Corrective distributions of excess plan contributions. Tax amendment   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. Tax amendment To correct an excess, your plan may distribute it to you (along with any income earned on the excess). Tax amendment Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. Tax amendment It is not subject to the allocation rules explained in the following discussion, it cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Tax amendment    If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “P,” or “E” in box 7. Tax amendment   For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. Tax amendment Figuring the Taxable Amount How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. Tax amendment If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. Tax amendment If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. Tax amendment You may be able to roll over the taxable amount of a nonperiodic distribution from a qualified retirement plan into another qualified retirement plan or a traditional IRA tax free. Tax amendment See Rollovers, later. Tax amendment If you do not make a tax-free rollover and the distribution qualifies as a lump-sum distribution, you may be able to elect an optional method of figuring the tax on the taxable amount. Tax amendment See Lump-Sum Distributions, later. Tax amendment Annuity starting date. Tax amendment   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. Tax amendment Distributions of employer securities. Tax amendment    If you receive a distribution of employer securities from a qualified retirement plan, you may be able to defer the tax on the net unrealized appreciation (NUA) in the securities. Tax amendment The NUA is the net increase in the securities' value while they were in the trust. Tax amendment This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. Tax amendment   If the distribution is a lump-sum distribution, tax is deferred on all of the NUA unless you choose to include it in your income for the year of the distribution. Tax amendment    A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance (within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. Tax amendment    If you choose to include NUA in your income for the year of the distribution and the participant was born before January 2, 1936, you may be able to figure the tax on the NUA using the optional methods described und
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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 Tax Amendment

Tax amendment Index A Alimony paid, Alimony paid. Tax amendment Alimony received, Alimony received. Tax amendment Annulment, Divorce or separation. Tax amendment Assistance (see Tax help) B Basis of property, death of spouse, Death of spouse. Tax amendment Business expenses, Business and investment expenses. Tax amendment C Child tax credit, Child tax credit. Tax amendment Civil service annuities, Civil service retirement. Tax amendment Community income defined, Community or Separate Property and Income Community income, special rules, Certain community income not treated as community income by one spouse. Tax amendment Community property defined, Community or Separate Property and Income Community property laws disregarded, Community Property Laws Disregarded Credits Child tax credit, Credits, Taxes, and Payments Earned income credit, Earned income credit. Tax amendment CSRS annuities, Civil service retirement. Tax amendment D Death of spouse, basis of property, Death of spouse. Tax amendment Deductions Alimony paid, Deductions Business expenses, Deductions Investment expenses, Deductions IRA deduction, Deductions Personal expenses, Deductions Dependents, Exemptions Dividends, Dividends, interest, and rents. Tax amendment Divorce, Divorce or separation. Tax amendment Domestic partners, Registered domestic partners. Tax amendment Domicile, Domicile E Earned income credit, Earned income credit. Tax amendment End of the marital community, End of the Community Equitable relief, Equitable relief. Tax amendment ESA withdrawals, Withdrawals from individual retirement arrangements (IRAs) and Coverdell Education Savings Accounts (ESAs). Tax amendment Estimated tax payments, Estimated tax payments. Tax amendment Exempt income, Tax-exempt income. Tax amendment Exemptions Dependent, Exemptions Personal, Exemptions Extensions, Extension of time to file. Tax amendment F FERS annuities, Civil service retirement. Tax amendment Form 8958, Community or Separate Property and Income, Identifying Income, Deductions, and Credits, Dividends, interest, and rents. Tax amendment , Separate Return Preparation Free tax services, Free help with your tax return. Tax amendment G Gains and losses, Gains and losses. Tax amendment H Help (see Tax help) I Income Alimony received, Income Civil service annuities, Income Dividends, Income Gains and losses, Income Interest, Income IRA distributions, Income Lump-sum distributions, Income Military retirement pay, Income Partnership income, Income Pensions, Income Rents, Income Separate income, Income from separate property. Tax amendment Tax-exempt income, Income Wages, earnings, and profits, Income Innocent spouse relief, Relief from liability arising from community property law. Tax amendment , Equitable relief. Tax amendment Interest, Dividends, interest, and rents. Tax amendment Investment expenses, Business and investment expenses. Tax amendment IRA deduction, IRA deduction. Tax amendment IRA distributions, Withdrawals from individual retirement arrangements (IRAs) and Coverdell Education Savings Accounts (ESAs). Tax amendment J Joint return vs. Tax amendment separate returns, Joint Return Versus Separate Returns L Lump-sum distributions, Lump-sum distributions. Tax amendment M Military retirement pay, Military retirement pay. Tax amendment N Nonresident alien spouse, Nonresident alien spouse. Tax amendment O Overpayments, Overpayments. Tax amendment P Partnership income, Partnership income. Tax amendment Partnerships, self-employment tax, Partnerships. Tax amendment Payments Estimated tax payments, Estimated tax payments. Tax amendment Federal income tax withheld, Federal income tax withheld. Tax amendment Pensions, Pensions. Tax amendment Personal expenses, Personal expenses. Tax amendment Publications (see Tax help) R Registered domestic partners, Registered domestic partners. Tax amendment Relief from liability arising from community property law, Relief from liability arising from community property law. Tax amendment Rents, Dividends, interest, and rents. Tax amendment S Self-employment tax Partnership, Self-employment tax. Tax amendment Sole proprietorship, Self-employment tax. Tax amendment Separate income defined, Separate income. Tax amendment Separate property defined, Community or Separate Property and Income Separate property income, Income from separate property. Tax amendment Separate returns Extensions, Extension of time to file. Tax amendment Separate returns vs. Tax amendment joint return, Joint Return Versus Separate Returns Separated spouses, Spouses living apart all year. Tax amendment Separation agreement, Divorce or separation. Tax amendment Sole proprietorship, self-employment tax, Sole proprietorship. Tax amendment Spousal agreements, Spousal agreements. Tax amendment Spouses living apart, Spouses living apart all year. Tax amendment T Tax help, How To Get Tax Help Tax-exempt income, Tax-exempt income. Tax amendment TTY/TDD information, How To Get Tax Help W Wages, earnings, and profits, Wages, earnings, and profits. Tax amendment Withholding tax, Federal income tax withheld. Tax amendment Prev  Up     Home   More Online Publications