![Page 1: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/1.jpg)
TAX-AIDE
TAX-AIDE
Retirement Income:IRAs and Pensions
Pub 4491 – Part 3
Pub 4012 – Page D-19
NTTC Training – 2014 1
![Page 2: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/2.jpg)
TAX-AIDE
Types of Retirement Income
● Individual Retirement Arrangement (IRA) Distributions
● Pensions
● Annuities
● Social Security (covered in a separate lesson)
NTTC Training – 2014 2
![Page 3: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/3.jpg)
TAX-AIDE
Retirement Income Reported on:
● Form 1099-R – Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
● Form RRB 1099-R – Annuities or Pensions by the Railroad Retirement Board
● Form CSA 1099-R – Statement of Annuity Paid (civil service retirement payments)
● Form CSF 1099-R – Statement of Survivor Annuity Paid
NTTC Training – 2014 3
![Page 4: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/4.jpg)
TAX-AIDE
Four Types of IRAs
● Traditional
● Roth
● Savings Incentive Match Plans for Employees (SIMPLE)
● Simplified Employee Pension (SEP)
NTTC Training – 2014 4
Pub 17 Chapter 17
![Page 5: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/5.jpg)
TAX-AIDE
IRA Distributions
● Regular
● Required minimum distributions (RMD)
● Trustee to trustee transfer (not taxable)
● Rollover (not taxable if done right)
NTTC Training – 2014 5
Pub 17 Ch 17
![Page 6: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/6.jpg)
TAX-AIDE
Intake and Interview
NTTC Training – 2014 6
![Page 7: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/7.jpg)
TAX-AIDE
Interview
With 1099-R in hand – if IRA box checked:
●What type of IRA? – Traditional
●Did taxpayer ever make non-deductible contributions?
●If early distribution, is there an exception to avoid additional tax?
●If rollover was made, was it timely?
NTTC Training – 2014 8
![Page 8: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/8.jpg)
TAX-AIDE
1099-RWhat is this form telling you?
NTTC Training – 2014 9
![Page 9: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/9.jpg)
TAX-AIDE
1099-R
● Must have correct SSN on form
● If not correct – taxpayer needs to get corrected 1099-R
● If ITIN return and cannot get a 1099-R with the ITIN, need to paper file the return (cannot be e-filed)
NTTC Training – 2014 10
![Page 10: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/10.jpg)
TAX-AIDE
Interview
With 1099-R in hand – if IRA box checked:
●What type of IRA? – Roth
●Was any part a conversion? When?
●If early distribution, is there an exception to avoid additional tax?
●If rollover was made, was it timely?
NTTC Training – 2014 11
![Page 11: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/11.jpg)
TAX-AIDE
Interview
With 1099-R in hand – if IRA box checked:
●What type of IRA? – SEP/SIMPLE
●Confirm all is taxable
●If early distribution, is there an exception to avoid additional tax?
●If rollover was made, was it timely?
NTTC Training – 2014 12
![Page 12: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/12.jpg)
TAX-AIDE
IRA Box 7 In-Scope Distribution Codes
*In scope for Tax-Aide only
NTTC Training – 2014 13
7 Normal distribution (most common)1 Early withdrawal, no known
exception, 10% additional tax2 Early distribution, exception applies3 Disability4 Death6 Tax-free Section 1035 exchange*
![Page 13: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/13.jpg)
TAX-AIDE
IRA Box 7 In-Scope Distribution Codes
NTTC Training – 2014 14
B Designated Roth account distributionF Charitable gift annuityG Rollover not taxable, no additional
tax appliesH Rollover from designated Roth to
Roth IRA
![Page 14: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/14.jpg)
TAX-AIDE
IRA Box 7 In-Scope Distribution Codes
*In scope for Tax-Aide only
NTTC Training – 2014 15
Q Qualified distribution from Roth IRAJ or T Roth distribution – in scope only if
wholly not taxableS Early withdrawal SIMPLE, no known
exception, 25% additional taxW Charges or payments for LTC
contracts*
![Page 15: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/15.jpg)
TAX-AIDE
IRA Box 7 In-Scope Distribution Codes
● Possible double letter codes Look up each letter Example
G4 – rollover distribution to beneficiary upon death of account holder
NTTC Training – 2014 16
![Page 16: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/16.jpg)
TAX-AIDE
Traditional IRA Distributions
● Required Minimum Distribution (RMD) Must take required minimum distribution
– age 70½ Must take by April 1 of year following Can avoid two distributions taxed in one
year by taking first in year turn 70½
NTTC Training – 2014 17
Pub 17 Ch 17
![Page 17: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/17.jpg)
TAX-AIDE
Traditional IRA RMD
● IRA administrator (trustee) normally calculates RMD
● Taxpayer responsible to take RMD
● 50% additional tax for amount not distributed (“too late” penalty)
● Can request waiver of additional tax using Form 5329 Part VIII
NTTC Training – 2014 18
![Page 18: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/18.jpg)
TAX-AIDE
Traditional IRA RMD
● Can take total RMD from one account rather than from several accounts
● If taxpayer is 70½ or older, confirm with taxpayer that total RMD was taken
NTTC Training – 2014 19
![Page 19: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/19.jpg)
TAX-AIDE
RMD Failure – Waiver Request
● Request waiver of additional tax using Form 5329 Part VIII Explain situation (relied on trustee,
clerical error in calculation) Taxpayer needs to correct by taking the
missed distribution amount (results in bunching of more than one distribution in the year corrected)
NTTC Training – 2014 20
![Page 20: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/20.jpg)
TAX-AIDE
Traditional IRA Distributions
● Potential 10% additional tax for distribution prior to 59½ (“too early” penalty) 25% for SIMPLE distributions within 2
years and prior to 59½
● Exceptions may apply
NTTC Training – 2014 21
![Page 21: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/21.jpg)
TAX-AIDE
Traditional IRA Distributions
● Traditional to Roth Conversion – Code 2 Fully taxable if no basis in Traditional IRA No penalty Out of scope (requires Form 8606 Part II)
NTTC Training – 2014 22
![Page 22: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/22.jpg)
TAX-AIDE
Form 8606 – Part I
● Running record of nondeductible contributions and remaining basis The basis in IRA is recovered each year
based on a ratio That year’s distribution Compared to value of all Traditional IRAs
NTTC Training – 2014 23
![Page 23: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/23.jpg)
TAX-AIDE
Form 8606 – Part I
● On 1099-R, check box under line 5 of exclusion worksheet Form 8606 appears in forms tree
NTTC Training – 2014 24
![Page 24: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/24.jpg)
TAX-AIDE
Form 8606 – Part I
● Line 1 if any part of 2014 contribution is nondeductible, enter amount
● Line 2 – unrecovered cost basis from previous years (from 2013 Form 8606 line 14, if did not carry forward in TaxWise)
NTTC Training – 2014 25
20142015 2015
20132014
![Page 25: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/25.jpg)
TAX-AIDE
Form 8606 – Part I
● Taxpayer must provide value of all Traditional IRA accounts as of 12/31/13
● TaxWise takes taxable portion of IRA distribution to 1040 Line 15b
NTTC Training – 2014 26
![Page 26: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/26.jpg)
TAX-AIDE
Roth IRA
● Contributions not deductible
● Distributions tax free if conditions met Pub 17, last page of chapter 17 Otherwise out-of-scope
NTTC Training – 2014 27
![Page 27: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/27.jpg)
TAX-AIDE
Qualified Roth IRA Distributions
● No additional tax if: Made after the five-year period
beginning with first contribution -AND- Made on or after age 59½ -OR- Disabled -OR- Death -OR- To pay up to $10,000 of certain qualified
first-time homebuyer amounts
NTTC Training – 2014 28
![Page 28: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/28.jpg)
TAX-AIDE
Roth IRA Distributions
● Many payers using code J or T (Code Q is qualifying Roth distribution) If taxpayer meets rules for qualified
distribution, use Exclusion Worksheet – Line 5
NTTC Training – 2014 29
![Page 29: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/29.jpg)
TAX-AIDE
Roth IRA Distributions
NTTC Training – 2014 30
![Page 30: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/30.jpg)
TAX-AIDE
SIMPLE or SEP IRA Distributions
● Taxed like Traditional IRA – fully taxable
● Early distribution within 2 years – additional tax applies (SIMPLE at rate of 25% if box 7 code is “S”)
● RMD rules apply
NTTC Training – 2014 31
![Page 31: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/31.jpg)
TAX-AIDE
TaxWise Form 1099-R
NTTC Training – 2014 32
![Page 32: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/32.jpg)
TAX-AIDE
TaxWise Form 1099-R
NTTC Training – 2014 33
Impact State tax treatment – read state instructions
![Page 33: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/33.jpg)
TAX-AIDE
Early Distribution – Code 1
● IRA distribution prior to age 59½ subject to 10% additional tax
● Some early distributions may be exempt from additional tax – add Form 5329
NTTC Training – 2014 34
![Page 34: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/34.jpg)
TAX-AIDE
Common Form 5329 Exception Codes
Avoid additional tax if distribution was:03 due to total and permanent disability
04 due to death
05 for medical expenses >10% of AGI
07 made for unemployed individual health insurance premiums
08 made for higher education expenses
NTTC Training – 2014 35
![Page 35: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/35.jpg)
TAX-AIDE
Pub 5329 Additional Taxes on Qualified Plans
● See Pub 4012, page H-2 for exception codes
● More in later lesson
NTTC Training – 2014 36
![Page 36: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/36.jpg)
TAX-AIDE
“Pension” Distributions
● Reported on Forms 1099-R – company plans RRB-1099-R – (green) Railroad Benefit CSA-1099-R – civil service, government
NTTC Training – 2014 39
![Page 37: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/37.jpg)
TAX-AIDE
Definitions
● Pension: Series of determinable payments made to employee (or survivor) after retirement from work
● Annuity: Payments under contract from insurance company, trust company or individual
NTTC Training – 2014 40
Pub 17, Ch 10
![Page 38: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/38.jpg)
TAX-AIDE
Interview
● With 1099-R in hand – IRA box not checked: Did taxpayer make non-deductible
contributions? If disability pension income, is taxpayer
under retirement age? Is taxpayer a retired public safety officer?
NTTC Training – 2014 41
![Page 39: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/39.jpg)
TAX-AIDE
1099-RWhat is this form telling you?
NTTC Training – 2014 42
![Page 40: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/40.jpg)
TAX-AIDE
2014
Railroad Retirement 1099-R
NTTC Training – 2014 43
1,089.16
1,089.16
-0-
-0-
354.00
![Page 41: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/41.jpg)
TAX-AIDE
Be sure to check Railroad Retirement in TaxWise if applicable
NTTC Training – 2014 44
![Page 42: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/42.jpg)
TAX-AIDE
Disability Retirements Code 3
● Until taxpayer reaches minimum retirement age Disability payments taxed as wages Reported on 1040 line7, eligible for
Earned Income Credit
● Once retirement age is reached Disability payment taxed as pension Reported on 1040 line 16
NTTC Training – 2014 45
![Page 43: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/43.jpg)
TAX-AIDE
Entry of Disability – TaxWise
● If Code 3 and person on disability but under retirement age, mark box as shown
● Amount will transfer to Line 7 Wages
NTTC Training – 2014 46
![Page 44: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/44.jpg)
TAX-AIDE
Civil Service Pensions
● Same rules as private employer plans● Slightly different form● Box 5 has insurance charges or basis
recovered this year● Input exactly as on form
Use simplified method if applicable Use Public Safety Officer medical if
applicable
NTTC Training – 2014 47
![Page 45: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/45.jpg)
TAX-AIDE
CSA 1099-R
NTTC Training – 2014 48
Insurance premium or basis recovered in 2014 or both
2014
![Page 46: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/46.jpg)
TAX-AIDE
Public Safety Officer Exclusion
NTTC Training – 2014 49
![Page 47: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/47.jpg)
TAX-AIDE
Taxable Distributions
● Payer reports taxable portion of distribution in Box 2a on 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) “Taxable amount not determined” checked
NTTC Training – 2014 50
![Page 48: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/48.jpg)
TAX-AIDE
Taxable Distributions
● Two methods used to figure taxable portion General Rule – Out of Scope Simplified Method
● Pub 4012 (Page D-23), 1099-R Simplified method Worksheet
NTTC Training – 2014 51
![Page 49: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/49.jpg)
TAX-AIDE
Simplified Method
● To calculate you will need: Cost in plan (Box 9b Form 1099-R) Age – taxpayer’s age on date annuity
began and spouse’s age if joint/survivor annuity
is selected note if annuity starting date is before or
after taxpayer’s birthday for that year
NTTC Training – 2014 52
![Page 50: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/50.jpg)
TAX-AIDE
Simplified Method
● To calculate you will also need: Total of tax-free amounts from previous years –
available from the taxpayer’s prior year worksheet or calculate: exclusion per month x number of months since retirement
Check previous year amounts (whether taken or not) to assure total cost recovery has not occurred
● Nifty calculator at http://aarp.bogarthome.net/Annuity-Pension%20Calculator.htm
NTTC Training – 2014 53
![Page 51: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/51.jpg)
TAX-AIDE
Simplified Method – Single Annuitant
NTTC Training – 2014 54
![Page 52: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/52.jpg)
TAX-AIDE
Simplified Method – Joint Annuitant
NTTC Training – 2014 55
![Page 53: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/53.jpg)
TAX-AIDE
Simplified Method
● After completing Simplified Method worksheet, DO NOT enter taxable amount in Box 2 on 1099-R
● Correct taxable amount will carry forward to 1040, Line 16b
NTTC Training – 2014 56
![Page 54: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/54.jpg)
TAX-AIDE
Pension Complications
● Lump-sum (total) distributions Shown to right of Box 2 of Form 1099-R If Box 7 code is A – special tax treatment
options in Pub 17 – Out of Scope
● Premature distributions – same rules and penalties as IRAs
NTTC Training – 2014 57
![Page 55: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/55.jpg)
TAX-AIDE
Pension Distribution – Special Case
● Taxpayer dies while still employed
● Spouse survives – draws survivor benefits from pension of deceased Taxpayer
● Must use only date of birth of spouse and date when spouse started receiving benefit for simplified method
NTTC Training – 2014 58
![Page 56: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/56.jpg)
TAX-AIDE
Special Case 2
● Box 1 has a gross distribution amount and Box 2a has “0”
● Box 2b not checked
● Taxable amount wasdetermined!
NTTC Training – 2014 59
![Page 57: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/57.jpg)
TAX-AIDE
Special Case 2
● TaxWise defaults the whole distribution as taxable
● Putting “0” in box 2 doesn’t work
NTTC Training – 2014 60
![Page 58: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/58.jpg)
TAX-AIDE
Special Case 2
● Need to use line 5 of Exclusion Worksheet to zero out taxable amount
NTTC Training – 2014 61
![Page 59: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/59.jpg)
TAX-AIDE
Special Case 3
● Total distribution box is checked
● Box 1 has gross distribution amount
● Box 5 has number equal to or larger than Box 1
NTTC Training – 2014 62
![Page 60: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/60.jpg)
TAX-AIDE
Special Case 3
● Confirm underlying facts with taxpayer Cashed out an annuity? Other termination of plan?
NTTC Training – 2014 63
![Page 61: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/61.jpg)
TAX-AIDE
Special Case 3
● TaxWise defaults the whole distribution as taxable
● Putting “0” in box 2 doesn’t work
NTTC Training – 2014 64
![Page 62: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/62.jpg)
TAX-AIDE
Special Case 3
● Need to use line 5 of the Exclusion Worksheet to zero out taxable amount
NTTC Training – 2014 65
![Page 63: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/63.jpg)
TAX-AIDE
Special Case 3
● May have a loss on annuity if “total distribution” (box checked) and box 5 is greater than box 1
● Potential itemized deduction for unrecovered investment in the contract Not subject to 2% of AGI floor if due to
death of annuitant Otherwise, subject to 2% of AGI floor
NTTC Training – 2014 66
![Page 64: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/64.jpg)
TAX-AIDE
Special Case 3
● Link from Sch A, Line 28 or Line 23 to new respective worksheet
NTTC Training – 2014 67
![Page 65: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/65.jpg)
TAX-AIDE
Special Case 3
● Describe and enter the loss amount
Employee contribution box 5: $6,500
Less total distribution box 1: -5,000
Loss amount to enter $1,500
NTTC Training – 2014 68
2013
![Page 66: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/66.jpg)
TAX-AIDE
Distributions
● Taxability computed separately on each 1099-R Input one at a time and complete all
input related to it
NTTC Training – 2014 69
![Page 67: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/67.jpg)
TAX-AIDE
Missing 1099-R
● If attempts to get 1099-R from payer or IRS are unsuccessful, complete return with Form 4852
NTTC Training – 2014 70
![Page 68: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/68.jpg)
TAX-AIDE
Missing 1099-R – Form 4852
● Click “add” in form tree
● Search for “4852”
● Click “add”
NTTC Training – 2014 71
![Page 69: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/69.jpg)
TAX-AIDE
Form 4852
● Form 4852 requires a parent form● If there is 1099-R in return, click “Select an
existing form”● Click “Select 1099R”
NTTC Training – 2014 72
![Page 70: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/70.jpg)
TAX-AIDE
Form 4852
● If there is no 1099-R in tree, click “Add a new form”
● “Add 1099-R”
NTTC Training – 2014 73
![Page 71: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/71.jpg)
TAX-AIDE
Form 4852
● Complete Form 4852 Use prior year 1099-R, if applicable If IRS sent taxpayer a Form 4852 with
information on it, transfer it to TaxWise
NTTC Training – 2014 74
![Page 72: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/72.jpg)
TAX-AIDE
Form 4852
● Complete as much payer information as possible
NTTC Training – 2014 75
![Page 73: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/73.jpg)
TAX-AIDE
Form 4852
● Complete sections 8, 9 and 10 for missing 1099-R
NTTC Training – 2014 76
![Page 74: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/74.jpg)
TAX-AIDE
Missing 1099-R – Form 4852
● Taxpayer should retain copy of 4852
● If taxpayer later receives 1099-R with different information, may need to amend return
NTTC Training – 2014 77
![Page 75: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/75.jpg)
TAX-AIDE
1099-R Recipient ID Number
● Taxpayer has ITIN, not SSN 1099-R has wrong ID number Cannot be e-filed May be paper filed
● If no recipient ID number Not a valid 1099-R Return is out of scope
NTTC Training – 2014 78
![Page 76: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/76.jpg)
TAX-AIDE
Quality Review
● Check accuracy of 1099-R input EIN! Withholding! Carry forward data updated?
● Is there an exception for early distribution
NTTC Training – 2014 79
![Page 77: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/77.jpg)
TAX-AIDE
Quality Review (cont)
● Was it a self-rollover? Did taxpayer meet rules?
● Look at 1040 lines 15 and 16 to confirm amounts are correct
● Make sure Fed and State Income Tax withheld is entered
NTTC Training – 2014 80
![Page 78: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/78.jpg)
TAX-AIDE
Exit Interview
● May need to explain 10% additional tax on early withdrawal
● Is taxpayer approaching 59½? 70½?
● Adjust withholding for next year W-4P W-4V for government payments
NTTC Training – 2014 81
![Page 79: TAX-AIDE Retirement Income: IRAs and Pensions Pub 4491 – Part 3 Pub 4012 – Page D-19 NTTC Training – 2014 1](https://reader031.vdocuments.mx/reader031/viewer/2022032606/56649e895503460f94b8d8ad/html5/thumbnails/79.jpg)
TAX-AIDE
IRA and Pension Income
Questions…
NTTC Training – 2014 82
Comments…