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Publication 721
taxmap/pubs/p721-006.htm#en_us_publink1000252332

(p27)

rule
taxmap/pubs/p721-006.htm#en_us_publink1000228413
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Worksheet A. Simplified Method
See the instructions in Part II of this publication under Simplified Method.

1.Enter the total pension or annuity payments received this year. Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1.
2.Enter your cost in the plan at the annuity starting date, plus any death benefit exclusion*. See Your cost in Part II, Rules for Retirees, earlier 2.
Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Otherwise, go to line 3. 
3.Enter the appropriate number from Table 1 below. 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.
4.Divide line 2 by the number on line 34.
5.Multiply line 4 by the number of months for which this year's payments were made. If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Otherwise, go to line 6 5.
6.Enter any amounts previously recovered tax free in years after 1986. This is the amount shown on line 10 of your worksheet for last year 6.
7.Subtract line 6 from line 27.
8.Enter the smaller of line 5 or line 7 8.
9.Taxable amount for year. Subtract line 8 from line 1. Enter the result, but not less than zero. Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b. If you are a nonresident alien, enter this amount on line 1 of Worksheet C. If your Form CSA 1099R or Form CSF 1099R shows a larger amount, use the amount figured on this line instead. If you are a retired public safety officer, see Distributions Used To Pay Insurance Premiums for Public Safety Officers in Part II before entering an amount on your tax return or Worksheet C, line 1 9.
10.Was your annuity starting date before 1987?
box Yes. stop Do not complete the rest of this worksheet.

box No. Add lines 6 and 8. This is the amount you have recovered tax free through 2010. You will need this number if you need to fill out this worksheet next year
10.
11.Balance of cost to be recovered. Subtract line 10 from line 2. If zero, you will not have to complete this worksheet next year. The payments you receive next year will generally be fully taxable 11.
Table 1 for Line 3 Above
 IF your age on your annuity
starting date was
 AND your annuity starting date was—
  before November 19, 1996,
THEN enter on line 3
after November 18, 1996,
THEN enter on line 3
 55 or under300360
 56–60260310
 61–65240260
 66–70170210
 71 or over120160

Table 2 for Line 3 Above
 IF the annuitants' combined ages on your annuity starting date were THEN enter on line 3   
 110 or under 410   
 111–120 360   
 121–130 310   
 131–140 260   
 141 or over 210   
* A death benefit exclusion of up to $5,000 applied to certain benefits received by survivors of employees who died before August 21, 1996.

taxmap/pubs/p721-006.htm#en_us_publink1000228418
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Worksheet B. Lump-Sum Payment
See the instructions in Part II of this publication under Alternative Annuity Option.

1.
Enter your lump-sum credit (your cost in the plan at the annuity starting date)1.
2.Enter the present value of your annuity contract2.
3.Divide line 1 by line 23.
4.Tax-free amount. Multiply line 1 by line 3. (Caution: Do not include this amount on line 6 of Worksheet A in this publication.) 4.
5.Taxable amount (net cost in the plan). Subtract line 4 from line 1. Include this amount in the total on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Also, enter this amount on line 2 of Worksheet A in this publication. 5.
 
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