Rollovers to Roth IRAs.(p2)
Beginning in 2008, you can roll over distributions directly from a qualified retirement plan to a Roth IRA if, for the tax year of the distribution, your modified adjusted gross income for Roth IRA purposes is not more than $100,000, and your filing status is not married filing separately. See Rollovers to Roth IRAs, later, for more information.taxmap/pubs/p575-000.htm#en_us_publink10005212
Tax relief for the Kansas disaster area.(p2)
Special rules apply to the use of retirement funds by qualified individuals who suffered an economic loss in the Kansas disaster area as a result of the storms and tornadoes that began on May 4, 2007. For more information, see Relief for Kansas Disaster Area, later.taxmap/pubs/p575-000.htm#en_us_publink100081801
Tax relief for the Midwestern disaster areas.(p2)
Special rules apply to the use of retirement funds by qualified individuals who suffered an economic loss in the Midwestern disaster areas as a result of severe storms, tornadoes, or flooding. For more information, see Relief for Midwestern Disaster Areas, later. taxmap/pubs/p575-000.htm#en_us_publink1000120565
Qualified settlement income.(p2)
Qualified settlement income you receive in connection with the Exxon Valdez litigation can be contributed, in whole or in part, to a qualified retirement plan. For more information, see Qualified settlement income under Rollovers, later.taxmap/pubs/p575-000.htm#en_us_publink1000125431
Temporary waiver of required minimum distribution (RMD) rules for certain retirement plans and IRAs for 2009.(p2)
No RMD is required from your employer-provided qualified retirement plan or IRA for 2009. For more information, see Temporary waiver of required minimum distributions (RMDs) for 2009, under Rollovers, later.taxmap/pubs/p575-000.htm#en_us_publink10004332
Hurricane tax relief.(p2)
Special rules apply to retirement funds received by qualified individuals who suffered an economic loss as a result of Hurricane Katrina, Rita, or Wilma. See Hurricane-Related Relief, for information on these special rules.taxmap/pubs/p575-000.htm#en_us_publink10004333taxmap/pubs/p575-000.htm#en_us_publink10004334
Photographs of missing children.(p2)
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
This publication discusses the tax treatment of distributions you receive from pension and annuity plans and also shows you how to report the income on your federal income tax return. How these distributions are taxed depends on whether they are periodic payments (amounts received as an annuity) that are paid at regular intervals over several years or nonperiodic payments (amounts not received as an annuity).taxmap/pubs/p575-000.htm#en_us_publink10004335
Publication 575 contains information that you need to understand the following topics.
- How to figure the tax-free part of periodic payments under a pension or annuity plan, including using a simple worksheet for payments under a qualified plan.
- How to figure the tax-free part of nonperiodic payments from qualified and nonqualified plans, and how to use the optional methods to figure the tax on lump-sum distributions from pension, stock bonus, and profit-sharing plans.
- How to roll over certain distributions from a retirement plan into another retirement plan or IRA.
- How to report disability payments, and how beneficiaries and survivors of employees and retirees must report benefits paid to them.
- How to report railroad retirement benefits.
- When additional taxes on certain distributions may apply (including the tax on early distributions and the tax on excess accumulation).
For additional information on how to report pension or annuity payments on your federal income tax return, be sure to review the instructions on the back of Copies B, C, and 2 of the Form 1099-R that you received and the instructions for Form 1040, lines 16a and 16b (Form 1040A, lines 12a and 12b or Form 1040NR, lines 17a and 17b).
A "corrected" Form 1099-R replaces the corresponding original Form 1099-R if the original Form 1099-R contained an error. Make sure you use the amounts shown on the corrected Form 1099-R when reporting information on your tax return.
The following topics are not discussed in this publication.taxmap/pubs/p575-000.htm#en_us_publink10004339
This is the method generally used to determine the tax treatment of pension and annuity income from nonqualified plans (including commercial annuities). For a qualified plan, you generally cannot use the General Rule unless your annuity starting date is before November 19, 1996. Although this publication will help you determine whether you can use the General Rule, it will not help you use it to determine the tax treatment of your pension or annuity income. For more information on the General Rule, see Publication 939, General Rule for Pensions and Annuities. taxmap/pubs/p575-000.htm#en_us_publink10004340
Information on the tax treatment of amounts you receive from an IRA is in Publication 590, Individual Retirement Arrangements (IRAs).taxmap/pubs/p575-000.htm#en_us_publink10004341
If you are retired from the federal government (either regular or disability retirement) or are the survivor or beneficiary of a federal employee or retiree who died, get Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits. Publication 721 covers the tax treatment of federal retirement benefits, primarily those paid under the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS). It also covers benefits paid from the Thrift Savings Plan (TSP).taxmap/pubs/p575-000.htm#en_us_publink10004342
For information about the tax treatment of these benefits, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. However, this publication (575) covers the tax treatment of the non-social security equivalent benefit portion of tier 1 railroad retirement benefits, tier 2 benefits, vested dual benefits, and supplemental annuity benefits paid by the U.S. Railroad Retirement Board.taxmap/pubs/p575-000.htm#en_us_publink10004343
If you work for a public school or certain tax-exempt organizations, you may be eligible to participate in a 403(b) retirement plan offered by your employer. Although this publication covers the treatment of benefits under 403(b) plans, it does not cover other tax provisions that apply to these plans. For more information on 403(b) plans, see Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt Organizations.taxmap/pubs/p575-000.htm#en_us_publink100070777
We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
Individual Forms and Publications Branch
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at *firstname.lastname@example.org
. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.
to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.
Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613
If you have a tax question, check the information available on www.irs.gov
or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.
You may want to see:
Publication 524 Credit for the Elderly or the Disabled 525 Taxable and Nontaxable Income 560 Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) 571 Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt Organizations 590 Individual Retirement Arrangements (IRAs) 721 Tax Guide to U.S. Civil Service Retirement Benefits 915 Social Security and Equivalent Railroad Retirement Benefits 939 General Rule for Pensions and Annuities 4492 Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma 4492-A Information for Taxpayers Affected by the May 4, 2007, Kansas Storms and Tornadoes 4492-B Information for Affected Taxpayers in the Midwestern Disaster Areas Form (and Instructions) W-4P: Withholding Certificate for Pension or Annuity Payments 1099-R: Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 4972: Tax on Lump-Sum Distributions 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 8915: Qualified Hurricane Retirement Plan Distributions and Repayments 8930: Qualified Disaster Recovery Assistance Retirement Plan Distributions and Repayments
See How To Get Tax Help near the end of this publication for information about getting publications and forms.taxmap/pubs/p575-000.htm#en_us_publink10004347taxmap/pubs/p575-000.htm#en_us_publink10004348
Some of the terms used in this publication are defined in the following paragraphs.taxmap/pubs/p575-000.htm#en_us_publink10004349
A pension is generally a series of definitely determinable payments made to you after you retire from work. Pension payments are made regularly and are based on such factors as years of service and prior compensation. taxmap/pubs/p575-000.htm#en_us_publink10004350
An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. They can be either fixed (under which you receive a definite amount) or variable (not fixed). You can buy the contract alone or with the help of your employer. taxmap/pubs/p575-000.htm#en_us_publink10004351
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. 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). To determine whether your plan is a qualified plan, check with your employer or the plan administrator.taxmap/pubs/p575-000.htm#en_us_publink10004352
A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. taxmap/pubs/p575-000.htm#en_us_publink10004353
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) or 403(b) plan designated as Roth contributions. Elective deferrals that are designated as Roth contributions are included in your income. However, qualified distributions are not included in your income. You should check with your plan administrator to determine if your plan will accept designated Roth contributions. taxmap/pubs/p575-000.htm#en_us_publink10004354
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. Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. taxmap/pubs/p575-000.htm#en_us_publink10004355
Pensions and annuities include the following types.taxmap/pubs/p575-000.htm#en_us_publink10004356
You receive definite amounts at regular intervals for a specified length of time.taxmap/pubs/p575-000.htm#en_us_publink10004357
You receive definite amounts at regular intervals for life. The payments end at death. taxmap/pubs/p575-000.htm#en_us_publink10004358
The first annuitant receives a definite amount at regular intervals for life. After he or she dies, a second annuitant receives a definite amount at regular intervals for life. The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. taxmap/pubs/p575-000.htm#en_us_publink10004359
You receive payments that may vary in amount for a specified length of time or for life. 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. taxmap/pubs/p575-000.htm#en_us_publink10004360
You receive disability payments because you retired on disability and have not reached minimum retirement age.taxmap/pubs/p575-000.htm#en_us_publink10004361
You may receive employee plan benefits from more than one program under a single trust or plan of your employer. 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. Also, you may be considered to have received more than one pension or annuity. Your former employer or the plan administrator should be able to tell you if you have more than one contract. taxmap/pubs/p575-000.htm#en_us_publink10004362
Your employer set up a noncontributory profit-sharing plan for its employees. The plan provides that the amount held in the account of each participant will be paid when that participant retires. 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.
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. Under the pension plan, however, a formula determines the amount of the pension benefits. The amount of contributions is the amount necessary to provide that pension.
Each plan is a separate program and a separate contract. 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.
Distributions from a designated Roth account are treated separately from other distributions from the plan.
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. 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. A QDRO may not award an amount or form of benefit that is not available under the plan.
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. 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. The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. The denominator is the present value of all benefits payable to the participant.
A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. taxmap/pubs/p575-000.htm#en_us_publink10004365
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. 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. 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. The earnings are not taxed until distributed either in a withdrawal or in annuity payments. The taxable part of a distribution is treated as ordinary income.
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.taxmap/pubs/p575-000.htm#en_us_publink10004366
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. The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan.
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). 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. 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).
If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable.
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. The rest is taxable.
For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments, later. If you withdraw funds from your annuity before you reach age 591/2, also see Tax on Early Distributions under Special Additional Taxes, later.taxmap/pubs/p575-000.htm#en_us_publink10004367
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. For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. 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. For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. taxmap/pubs/p575-000.htm#en_us_publink10004368
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. If you choose to receive an annuity, the payments are subject to tax as described above. 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. See Survivors and Beneficiaries, later. taxmap/pubs/p575-000.htm#en_us_publink10004369
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. 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. You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you.
This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525.taxmap/pubs/p575-000.htm#en_us_publink10004370
To find out if your plan is an eligible plan, check with your employer. 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.
- Nonelective deferred compensation plans for nonemployees (independent contractors).
- Deferred compensation plans maintained by churches.
- Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service.
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. 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. Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled.
You may be entitled to a tax credit if you were permanently and totally disabled when you retired. For information on this credit, see Publication 524.
Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b.
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. For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks.
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. The premiums can be for coverage for you, your spouse, or dependents. The distribution must be made directly from the plan to the insurance provider. You can exclude from income the smaller of the amount of the insurance premiums or $3,000. You can only make this election for amounts that would otherwise be included in your income. The amount excluded from your income cannot be used to claim a medical expense deduction.
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.
If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. The amount shown in box 2a of Form 1099-R does not reflect this exclusion. Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Enter "PSO" next to the appropriate line on which you report the taxable amount.
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.taxmap/pubs/p575-000.htm#en_us_publink10004375
Benefits paid under the Railroad Retirement Act fall into two categories. These categories are treated differently for income tax purposes.
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. 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. If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2008, 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.S. Railroad Retirement Board (RRB).
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.
The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. 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. (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R.) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. See Taxation of Periodic Payments, later, for information on how to report your benefits and how to recover the employee contributions tax free. Form RRB-1099-R is used for U.S. citizens, resident aliens, and nonresident aliens. taxmap/pubs/p575-000.htm#en_us_publink10004376
A nonresident alien is an individual who is not a citizen or a resident alien of the United States. Nonresident aliens are subject to mandatory U.S. tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. See Tax withholding next, for more information.
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. 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. For information on filing requirements for aliens, see Publication 519, U.S. Tax Guide for Aliens. For information on tax treaties between the United States and other countries that may reduce or eliminate U.S. tax on your benefits, see Publication 901, U.S. Tax Treaties.taxmap/pubs/p575-000.htm#en_us_publink10004377
For SSEB payments received, get Form W-4V, Voluntary Withholding Request, from the IRS and file it with the RRB to request or change your income tax withholding. For NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments, to elect, revoke, or change your income tax withholding. If you are a nonresident alien or a U.S. 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.S. tax withholding. Nonresident U.S. citizens cannot elect an exempt withholding status on payments delivered outside of the U.S.taxmap/pubs/p575-000.htm#en_us_publink10004378
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.S. consulate/Embassy if you reside outside the United States. You can visit the RRB on the Internet at www.rrb.gov.taxmap/pubs/p575-000.htm#en_us_publink10004379
The following discussion explains the items shown on Form RRB-1099-R. The amounts shown on this form are before any deduction for:
- Federal income tax withholding,
- Medicare premiums,
- Legal process garnishment payments,
- Overall minimum assignment 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.
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.
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. To determine if any of these rules apply to your benefits, see the discussions about them later.
Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. Use distribution code "7" if you are asked for a distribution code.
There are three copies of this form. Copy B is to be included with your income tax return if federal income tax is withheld. Copy C is for your own records. Copy 2 is filed with your state, city, or local income tax return, when required. See the illustrated Copy B (Form RRB-1099-R) above.
Each beneficiary will receive his or her own Form RRB-1099-R. If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. So that you get your form timely, make sure the RRB always has your current mailing address.
Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. This is the number under which the RRB paid your benefits. Your payee code follows your claim number and is the last number in this box. It is used by the RRB to identify you under your claim number. In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box.taxmap/pubs/p575-000.htm#en_us_publink10004383
This is the recipient's U.S. taxpayer identification number. 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.
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. The instructions for Form W-7 explain how and when to apply.
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. 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). (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later.) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. It is the latest amount reported for 2008 and may have increased or decreased from a previous Form RRB-1099-R. If this amount has changed, the change is retroactive. You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2008 and prior tax years. If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable.
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.
This is the gross amount of the NSSEB and tier 2 benefit you received in 2008, less any 2008 benefits you repaid in 2008. (Any benefits you repaid in 2008 for an earlier year or for an unknown year are shown in box 8.) This amount is the total contributory pension paid in 2008. It may be partly taxable and partly tax free or fully taxable. 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.taxmap/pubs/p575-000.htm#en_us_publink10004388
This is the gross amount of vested dual benefit (VDB) payments paid in 2008, less any 2008 VDB payments you repaid in 2008. It is fully taxable. VDB payments you repaid in 2008 for an earlier year or for an unknown year are shown in box 8.
The amounts shown in boxes 4 and 5 may represent payments for 2008 and/or other years after 1983.
This is the gross amount of supplemental annuity benefits paid in 2008, less any 2008 supplemental annuity benefits you repaid in 2008. It is fully taxable. Supplemental annuity benefits you repaid in 2008 for an earlier year or for an unknown year are shown in box 8.taxmap/pubs/p575-000.htm#en_us_publink10004391
This is the sum of boxes 4, 5, and 6. The amount represents the total pension paid in 2008. Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a.taxmap/pubs/p575-000.htm#en_us_publink10004392
This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2008 for years before 2008 or for unknown years. The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. It only includes repayments of benefits that were taxable to you. This means it only includes repayments in 2008 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. For more information about repayments, see Repayment of benefits received in an earlier year, later.
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.
This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. Include this on your income tax return as tax withheld. If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2008, you will receive more than one Form RRB-1099-R for 2008. Determine the total amount of U.S. federal income tax withheld from your 2008 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2008 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive.taxmap/pubs/p575-000.htm#en_us_publink10004395
If you are taxed as a U.S. citizen or resident alien, this box does not apply to you. 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 2008. If you are a nonresident alien whose tax was withheld at more than one rate during 2008, you will receive a separate Form RRB-1099-R for each rate change during 2008.taxmap/pubs/p575-000.htm#en_us_publink10004396
If you are taxed as a U.S. citizen or resident alien, this box does not apply to you. 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 2008. If you are a nonresident alien who was a resident of more than one country during 2008, you will receive a separate Form RRB-1099-R for each country of residence during 2008.taxmap/pubs/p575-000.htm#en_us_publink10004397
This is for information purposes only. The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2008. Medicare premium refunds are not included in the Medicare total. 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). However, if Form RRB-1099 or Form RRB-1042S is not required for 2008, then this total will be shown on Form RRB-1099-R. 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.taxmap/pubs/p575-000.htm#en_us_publink10004398
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.
If you repaid $3,000 or less in 2008, deduct it on Schedule A (Form 1040), line 23. The 2%-of-adjusted-gross- income limit applies to this deduction. You cannot take this deduction if you file Form 1040A.
If you repaid more than $3,000 in 2008, 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. For more information, see Repayments in Publication 525. taxmap/pubs/p575-000.htm#en_us_publink10004399
Your retirement plan distributions are subject to federal income tax withholding. However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. (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.) 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. See Estimated tax, later.
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.
For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company.
There will be no withholding on any part of a distribution that (it is reasonable to believe) will not be includible in gross income.
You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. You can make this choice on Form W-4P for periodic and nonperiodic payments. This choice generally remains in effect until you revoke it.
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.
To choose not to have tax withheld, a U.S. citizen or resident alien must give the payer a home address in the United States or its possessions. Without that address, the payer must withhold tax. For example, the payer has to withhold tax if the recipient has provided a U.S. address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U.S. home address.
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.S. citizen, a U.S. resident alien, or someone who left the country to avoid tax. But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. For details, get Publication 519.taxmap/pubs/p575-000.htm#en_us_publink10004402
Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. 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). You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). If you do not, tax will be withheld as if you were married and claiming three withholding allowances.
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.
You must file a new withholding certificate to change the amount of withholding.taxmap/pubs/p575-000.htm#en_us_publink10004403
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. You can also ask the payer to withhold an additional amount using Form W-4P. 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. taxmap/pubs/p575-000.htm#en_us_publink10004404
If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. You cannot choose not to have tax withheld from an eligible rollover distribution. 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. For more information about eligible rollover distributions, see Rollovers, later.taxmap/pubs/p575-000.htm#en_us_publink10004405
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. Generally, you must make estimated tax payments for 2009 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 2009 return, or
- 100% of the tax shown on your 2008 return.
If your adjusted gross income for 2008 was more than $150,000 ($75,000 if your filing status for 2009 is married filing separately), substitute 110% for 100% in (2) above. For more information, get Publication 505, Tax Withholding and Estimated Tax.
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. See Publication 915. You can choose to have income tax withheld from those benefits. Use Form W-4V to make this choice.