EKS Advanced Training Pilot 1

IRA and PENSION INCOME

Pub 4491 Lesson 11Pub 4012 Tab 2Form 1040 Lines 15-16Pub 17 Chapters 10, 17

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IRA DISTRIBUTIONSPub 17 Ch 17

• Reported on Form 1099-R

• SIMPLE IRAs and SEPsp122: out-of-scope

• Traditional IRAsp123

– See Intro and Who– Must take required minimum distribution - see

Excess Accumulationsp130

• Roth IRAsp131

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PENSIONS & ANNUITIESTab 2

– Box 7 codes (i.e. 7, 3, 4, 1, G)– Early Distributions (Code 1)– Disability Pensions (Code 3) – line 7 1040?– Exclusion Worksheet (i.e. rollover, PSO health

insur, simplified method)– “Simplified Method” – Box 9b (ee contrib)– 1099-R Most common– RRB-1099R (green) Railroad Benefits– CSA-1099R Civil Service

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Disability Retirements

• Disability payments are taxed as wages until the taxpayer reaches the minimum retirement age (age is set by the employer) - report on line 7 Form 1040

• After the taxpayer reaches the minimum retirement age, disability payments are treated as pension income to determine taxability – report on line 16 Form 1040

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Taxable Distributions

• Payer will compute the taxable portion of the distribution and report it (box 2a Form 1099-R)

• Retirement plans are funded by either before-tax or after-tax contributions– Before-tax - entire distribution will be fully taxable– After-tax – distributions partially taxable (box 9b

Form 1099-R)

• Two methods used to figure taxable portion the General Rule and the Simplified Method

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Simplified Method• Volunteer Resource Guide (Tab 2), 1099-R

Exclusion Worksheet - calculating the taxable portion using the Simplified Method

• To calculate you will need:

• Cost in the plan (box 9b Form 1099-R)

• Age - taxpayer’s age on the date the annuity began (and spouse’s age if joint/survivor annuity is selected); note if the annuity starting date is before or after the taxpayer’s birthday for that year

• Total of tax-free amounts from previous years - available from the taxpayer’s prior year worksheet

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Exclusion Worksheet(page 2-18 Pub 4012)

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RRB-1099R (Green)

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Pension Income

Questions?