Taxpayers receiving payments or distributions1 from any pensions or annuities must report such income on Line 16 of Form 1040. To do so, a taxpayer gathers all Form 1099-R statements issued during the year. These forms are sent from each bank, mutual fund, or institution where a taxpayer holds a retirement account, pension or an annuity. Once collected, the taxpayer should set aside 1099-R statements that were not sent on behalf of a pension or annuity (those forms will likely be used to calculate Line 15’s IRA Distributions value).
Determining the Taxable and Nontaxable Amounts of Pension/Annuity Income: To determine how much of the summed income from all owned pensions and annuities will be taxed, taxpayers must complete the Simplified Method Worksheet (see page 27). The Worksheet will ask for the original cost and purchase date of the investment as well as the length of the payment scheme. Once the Worksheet is finished, the taxpayer then transfers the Line 1 and Line 8 values to Form 1040’s Line 16a and Line 16b, respectfully.
For more detailed information on how rollovers, lump-sum distributions and other circumstances may affect pension and annuity income, please consult the Line 16 Instructions (see pages 25-27).
1includes distributions from 401(k), 403(b), and governmental 457(b) plans
Photo by: 401(k) 2013