Page 35 - Individual Forms & Instructions Guide

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Fully taxable pensions and annuities only for amounts that would otherwise monthly retirement benefit from income
also include military retirement pay be included in your income. (the difference between the early retire-
shown on Form 1099-R. For details on An eligible retirement plan is a gov- ment benefit and the normal retirement
military disability pensions, see Pub. ernmental plan that is a qualified trust or benefit, $3,000 - $2,500) received on ac-
525. If you received a Form a section 403(a), 403(b), or 457(b) plan. count of disability. J must report the re-
RRB-1099-R, see Pub. 575 to find out If you make this election, reduce the maining $2,500 of monthly pension ben-
how to report your benefits. efit as taxable. For each month after J
otherwise taxable amount of your pen- turns age 62, J must report the full
Partially Taxable Pensions and sion or annuity by the amount excluded. amount of the monthly pension benefit
The amount shown in box 2a of Form
Annuities 1099-R doesn't reflect the exclusion. Re- ($3,000 a month) as taxable.
Enter the total pension or annuity pay- port your total distributions on line 5a Simplified Method
ments (from Form 1099-R, box 1) on and the taxable amount on line 5b. Enter
line 5a. If your Form 1099-R doesn't “PSO” next to line 5b. You must use the Simplified Method if
show the taxable amount, you must use If you are retired on disability and re- either of the following applies.
the General Rule explained in Pub. 939 porting your disability pension on 1. Your annuity starting date was af-
to figure the taxable part to enter on line 1h, include only the taxable amount ter July 1, 1986, and you used this meth-
line 5b. But if your annuity starting date on that line and enter “PSO” and the od last year to figure the taxable part.
(defined later) was after July 1, 1986, amount excluded on the dotted line next 2. Your annuity starting date was af-
see Simplified Method, later, to find out to line 1h. ter November 18, 1996, and both of the
if you must use that method to figure the Payments when you are disabled. If following apply.
taxable part.
you receive payments from a retirement a. The payments are from a quali-
You can ask the IRS to figure the tax- or profit-sharing plan that does not pro- fied employee plan, a qualified employ-
able part for you for a $1,000 fee. For vide for disability retirement, do not ee annuity, or a tax-sheltered annuity.
details, see Pub. 939. treat those payments as disability pay- b. On your annuity starting date, ei-
If your Form 1099-R shows a taxable ments. The payments must be reported ther you were under age 75 or the num-
amount, you can report that amount on as a pension or annuity. ber of years of guaranteed payments was
line 5b. But you may be able to report a You must include in your income any fewer than 5. See Pub. 575 for the defi-
lower taxable amount by using the Gen- amounts that you received that you nition of guaranteed payments.
eral Rule or the Simplified Method or if would have received in retirement had
the exclusion for retired public safety of- you not become disabled as a result of a If you must use the Simplified Meth-
ficers, discussed next, applies. terrorist attack. Include in your income od, complete the Simplified Method
any payments you receive from a Worksheet in these instructions to figure
Insurance Premiums for Retired 401(k), pension, or other retirement plan the taxable part of your pension or annu-
Public Safety Officers to the extent that you would have re- ity. For more details on the Simplified
If you are an eligible retired public safe- ceived the amount at the same or later Method, see Pub. 575 (or Pub. 721 for
U.S. Civil Service retirement benefits).
ty officer (law enforcement officer, fire- time regardless of whether you had be-
fighter, chaplain, or member of a rescue come disabled. If you received U.S. Civil Serv-
squad or ambulance crew), you can elect Example. Taxpayer J, a contractor, ! ice retirement benefits and you
to exclude from income distributions was disabled as a direct result of partici- CAUTION chose the alternative annuity
made from your eligible retirement plan pating in efforts to clean up the World option, see Pub. 721 to figure the taxa-
that are used to pay the premiums for Trade Center. J is eligible for compensa- ble part of your annuity. Do not use the
coverage by an accident or health plan tion by the September 11 Victim Com- Simplified Method Worksheet in these
or a long-term care insurance contract. pensation Fund. J began receiving a dis- instructions.
You can do this only if you retired be- ability pension at age 55 when J could
cause of disability or because you no longer continue working because of Annuity Starting Date
reached normal retirement age. The pre- J’s disability. Under J’s pension plan, at
miums can be for coverage for you, your age 55, J is entitled to an early retire- Your annuity starting date is the later of
spouse, or dependents. The distribution ment benefit of $2,500. If J waits until the first day of the first period for which
must be from a plan maintained by the age 62, normal retirement age under the you received a payment or the date the
employer from which you retired as a plan, J would be entitled to a normal re- plan's obligations became fixed.
public safety officer. Also, the distribu- tirement benefit of $3,000 a month. The
tion must be made directly from the plan pension plan provides that a participant Age (or Combined Ages) at
to the provider of the accident or health who retires early on account of disability Annuity Starting Date
plan or long-term care insurance con- is entitled to receive the participant's If you are the retiree, use your age on
tract. You can exclude from income the normal retirement benefit, which in J's the annuity starting date. If you are the
smaller of the amount of the premiums case equals $3,000 per month. Until J survivor of a retiree, use the retiree's age
or $3,000. You can make this election turns age 62, J can exclude $500 of the on their annuity starting date. But if your

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