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File 1040nr

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File 1040nr

File 1040nr 2. File 1040nr   Simplified Employee Pensions (SEPs) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Setting Up a SEPWhen not to use Form 5305-SEP. File 1040nr How Much Can I Contribute?Contribution Limits Deducting ContributionsDeduction Limit for Contributions for Participants Deduction Limit for Self-Employed Individuals Carryover of Excess SEP Contributions When To Deduct Contributions Where To Deduct Contributions Salary Reduction Simplified Employee Pensions (SARSEPs)SARSEP ADP test. File 1040nr Deferral percentage. File 1040nr Employee compensation. File 1040nr Compensation of self-employed individuals. File 1040nr Choice not to treat deferrals as compensation. File 1040nr Limit on Elective Deferrals Tax Treatment of Deferrals Distributions (Withdrawals) Additional TaxesEffects on employee. File 1040nr Reporting and Disclosure Requirements Topics - This chapter discusses: Setting up a SEP How much can I contribute Deducting contributions Salary reduction simplified employee pensions (SARSEPs) Distributions (withdrawals) Additional taxes Reporting and disclosure requirements Useful Items - You may want to see: Publication 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4285 SEP Checklist 4286 SARSEP Checklist 4333 SEP Retirement Plans for Small Businesses 4336 SARSEP for Small Businesses 4407 SARSEP—Key Issues and Assistance Forms (and Instructions) W-2 Wage and Tax Statement 1040 U. File 1040nr S. File 1040nr Individual Income Tax Return 5305-SEP Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 5305A-SEP Salary Reduction Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan. File 1040nr Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. File 1040nr A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. File 1040nr SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). File 1040nr A SEP-IRA may have to be set up for a leased employee (defined in chapter 1), but does not need to be set up for excludable employees (defined later). File 1040nr Eligible employee. File 1040nr   An eligible employee is an individual who meets all the following requirements. File 1040nr Has reached age 21. File 1040nr Has worked for you in at least 3 of the last 5 years. File 1040nr Has received at least $550 in compensation from you in 2013. File 1040nr This amount remains the same in 2014. File 1040nr    You can use less restrictive participation requirements than those listed, but not more restrictive ones. File 1040nr Excludable employees. File 1040nr   The following employees can be excluded from coverage under a SEP. File 1040nr Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. File 1040nr Nonresident alien employees who have received no U. File 1040nr S. File 1040nr source wages, salaries, or other personal services compensation from you. File 1040nr For more information about nonresident aliens, see Publication 519, U. File 1040nr S. File 1040nr Tax Guide for Aliens. File 1040nr Setting Up a SEP There are three basic steps in setting up a SEP. File 1040nr You must execute a formal written agreement to provide benefits to all eligible employees. File 1040nr You must give each eligible employee certain information about the SEP. File 1040nr A SEP-IRA must be set up by or for each eligible employee. File 1040nr Many financial institutions will help you set up a SEP. File 1040nr Formal written agreement. File 1040nr   You must execute a formal written agreement to provide benefits to all eligible employees under a SEP. File 1040nr You can satisfy the written agreement requirement by adopting an IRS model SEP using Form 5305-SEP. File 1040nr However, see When not to use Form 5305-SEP, below. File 1040nr   If you adopt an IRS model SEP using Form 5305-SEP, no prior IRS approval or determination letter is required. File 1040nr Keep the original form. File 1040nr Do not file it with the IRS. File 1040nr Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and the Department of Labor. File 1040nr See the Form 5305-SEP instructions for details. File 1040nr If you choose not to use Form 5305-SEP, you should seek professional advice in adopting a SEP. File 1040nr When not to use Form 5305-SEP. File 1040nr   You cannot use Form 5305-SEP if any of the following apply. File 1040nr You currently maintain any other qualified retirement plan other than another SEP. File 1040nr You have any eligible employees for whom IRAs have not been set up. File 1040nr You use the services of leased employees, who are not your common-law employees (as described in chapter 1). File 1040nr You are a member of any of the following unless all eligible employees of all the members of these groups, trades, or businesses participate under the SEP. File 1040nr An affiliated service group described in section 414(m). File 1040nr A controlled group of corporations described in section 414(b). File 1040nr Trades or businesses under common control described in section 414(c). File 1040nr You do not pay the cost of the SEP contributions. File 1040nr Information you must give to employees. File 1040nr   You must give each eligible employee a copy of Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. File 1040nr An IRS model SEP is not considered adopted until you give each employee this information. File 1040nr Setting up the employee's SEP-IRA. File 1040nr   A SEP-IRA must be set up by or for each eligible employee. File 1040nr SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. File 1040nr You send SEP contributions to the financial institution where the SEP-IRA is maintained. File 1040nr Deadline for setting up a SEP. File 1040nr   You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year. File 1040nr Credit for startup costs. File 1040nr   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2013. File 1040nr For more information, see Credit for startup costs under Reminders, earlier. File 1040nr How Much Can I Contribute? The SEP rules permit you to contribute a limited amount of money each year to each employee's SEP-IRA. File 1040nr If you are self-employed, you can contribute to your own SEP-IRA. File 1040nr Contributions must be in the form of money (cash, check, or money order). File 1040nr You cannot contribute property. File 1040nr However, participants may be able to transfer or roll over certain property from one retirement plan to another. File 1040nr See Publication 590 for more information about rollovers. File 1040nr You do not have to make contributions every year. File 1040nr But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees (defined in chapter 1). File 1040nr When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, including employees who die or terminate employment before the contributions are made. File 1040nr Contributions are deductible within limits, as discussed later, and generally are not taxable to the plan participants. File 1040nr A SEP-IRA cannot be a Roth IRA. File 1040nr Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. File 1040nr Unlike regular contributions to a traditional IRA, contributions under a SEP can be made to participants over age 70½. File 1040nr If you are self-employed, you can also make contributions under the SEP for yourself even if you are over 70½. File 1040nr Participants age 70½ or over must take required minimum distributions. File 1040nr Time limit for making contributions. File 1040nr   To deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year. File 1040nr Contribution Limits Contributions you make for 2013 to a common-law employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000. File 1040nr Compensation generally does not include your contributions to the SEP. File 1040nr The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants. File 1040nr Example. File 1040nr Your employee, Mary Plant, earned $21,000 for 2013. File 1040nr The maximum contribution you can make to her SEP-IRA is $5,250 (25% x $21,000). File 1040nr Contributions for yourself. File 1040nr   The annual limits on your contributions to a common-law employee's SEP-IRA also apply to contributions you make to your own SEP-IRA. File 1040nr However, special rules apply when figuring your maximum deductible contribution. File 1040nr See Deduction Limit for Self-Employed Individuals , later. File 1040nr Annual compensation limit. File 1040nr   You cannot consider the part of an employee's compensation over $255,000 when figuring your contribution limit for that employee. File 1040nr However, $51,000 is the maximum contribution for an eligible employee. File 1040nr These limits are $260,000 and $52,000, respectively, in 2014. File 1040nr Example. File 1040nr Your employee, Susan Green, earned $210,000 for 2013. File 1040nr Because of the maximum contribution limit for 2013, you can only contribute $51,000 to her SEP-IRA. File 1040nr More than one plan. File 1040nr   If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $51,000 or 100% of the participant's compensation. File 1040nr When you figure this limit, you must add your contributions to all defined contribution plans maintained by you. File 1040nr Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain. File 1040nr Tax treatment of excess contributions. File 1040nr   Excess contributions are your contributions to an employee's SEP-IRA (or to your own SEP-IRA) for 2013 that exceed the lesser of the following amounts. File 1040nr 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment). File 1040nr $51,000. File 1040nr Excess contributions are included in the employee's income for the year and are treated as contributions by the employee to his or her SEP-IRA. File 1040nr For more information on employee tax treatment of excess contributions, see chapter 1 in Publication 590. File 1040nr Reporting on Form W-2. File 1040nr   Do not include SEP contributions on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). File 1040nr Deducting Contributions Generally, you can deduct the contributions you make each year to each employee's SEP-IRA. File 1040nr If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA. File 1040nr Deduction Limit for Contributions for Participants The most you can deduct for your contributions to you or your employee's SEP-IRA is the lesser of the following amounts. File 1040nr Your contributions (including any excess contributions carryover). File 1040nr 25% of the compensation (limited to $255,000 per participant) paid to the participants during 2013 from the business that has the plan, not to exceed $51,000 per participant. File 1040nr In 2014, the amounts in (2) above are $260,000 and $52,000, respectively. File 1040nr Deduction Limit for Self-Employed Individuals If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. File 1040nr When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions. File 1040nr The deduction for the deductible part of your self-employment tax. File 1040nr The deduction for contributions to your own SEP-IRA. File 1040nr The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. File 1040nr For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. File 1040nr To do this, use the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever is appropriate for your plan's contribution rate, in chapter 5. File 1040nr Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. File 1040nr Carryover of Excess SEP Contributions If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry over and deduct the difference in later years. File 1040nr However, the carryover, when combined with the contribution for the later year, is subject to the deduction limit for that year. File 1040nr If you also contributed to a defined benefit plan or defined contribution plan, see Carryover of Excess Contributions under Employer Deduction in chapter 4 for the carryover limit. File 1040nr Excise tax. File 1040nr   If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. File 1040nr For information about the excise tax, see Excise Tax for Nondeductible (Excess) Contributions under Employer Deduction in chapter 4. File 1040nr When To Deduct Contributions When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. File 1040nr If the SEP is maintained on a calendar year basis, you deduct the yearly contributions on your tax return for the year within which the calendar year ends. File 1040nr If you file your tax return and maintain the SEP using a fiscal year or short tax year, you deduct contributions made for a year on your tax return for that year. File 1040nr Example. File 1040nr You are a fiscal year taxpayer whose tax year ends June 30. File 1040nr You maintain a SEP on a calendar year basis. File 1040nr You deduct SEP contributions made for calendar year 2013 on your tax return for your tax year ending June 30, 2014. File 1040nr Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. File 1040nr For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U. File 1040nr S. File 1040nr Return of Partnership Income; and corporations deduct them on Form 1120, U. File 1040nr S. File 1040nr Corporation Income Tax Return, or Form 1120S, U. File 1040nr S. File 1040nr Income Tax Return for an S Corporation. File 1040nr Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. File 1040nr (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. File 1040nr , you receive from the partnership. File 1040nr ) Remember that sole proprietors and partners can't deduct as a business expense contributions made to a SEP for themselves, only those made for their common-law employees. File 1040nr Salary Reduction Simplified Employee Pensions (SARSEPs) A SARSEP is a SEP set up before 1997 that includes a salary reduction arrangement. File 1040nr (See the Caution, next. File 1040nr ) Under a SARSEP, your employees can choose to have you contribute part of their pay to their SEP-IRAs rather than receive it in cash. File 1040nr This contribution is called an “elective deferral” because employees choose (elect) to set aside the money, and they defer the tax on the money until it is distributed to them. File 1040nr You are not allowed to set up a SARSEP after 1996. File 1040nr However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have you contribute part of their pay to the plan. File 1040nr If you are interested in setting up a retirement plan that includes a salary reduction arrangement, see chapter 3. File 1040nr Who can have a SARSEP?   A SARSEP set up before 1997 is available to you and your eligible employees only if all the following requirements are met. File 1040nr At least 50% of your employees eligible to participate choose to make elective deferrals. File 1040nr You have 25 or fewer employees who were eligible to participate in the SEP at any time during the preceding year. File 1040nr The elective deferrals of your highly compensated employees meet the SARSEP ADP test. File 1040nr SARSEP ADP test. File 1040nr   Under the SARSEP ADP test, the amount deferred each year by each eligible highly compensated employee as a percentage of pay (the deferral percentage) cannot be more than 125% of the average deferral percentage (ADP) of all non-highly compensated employees eligible to participate. File 1040nr A highly compensated employee is defined in chapter 1. File 1040nr Deferral percentage. File 1040nr   The deferral percentage for an employee for a year is figured as follows. File 1040nr   The elective employer contributions (excluding certain catch-up contributions)  paid to the SEP for the employee for the year     The employee's compensation (limited to $255,000 in 2013)   The instructions for Form 5305A-SEP have a worksheet you can use to determine whether the elective deferrals of your highly compensated employees meet the SARSEP ADP test. File 1040nr Employee compensation. File 1040nr   For figuring the deferral percentage, compensation is generally the amount you pay to the employee for the year. File 1040nr Compensation includes the elective deferral and other amounts deferred in certain employee benefit plans. File 1040nr See Compensation in chapter 1. File 1040nr Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they are not included in the income of your employees for income tax purposes. File 1040nr Compensation of self-employed individuals. File 1040nr   If you are self-employed, compensation is your net earnings from self-employment as defined in chapter 1. File 1040nr   Compensation does not include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts. File 1040nr Choice not to treat deferrals as compensation. File 1040nr   You can choose not to treat elective deferrals (and other amounts deferred in certain employee benefit plans) for a year as compensation under your SARSEP. File 1040nr Limit on Elective Deferrals The most a participant can choose to defer for calendar year 2013 is the lesser of the following amounts. File 1040nr 25% of the participant's compensation (limited to $255,000 of the participant's compensation). File 1040nr $17,500. File 1040nr The $17,500 limit applies to the total elective deferrals the employee makes for the year to a SEP and any of the following. File 1040nr Cash or deferred arrangement (section 401(k) plan). File 1040nr Salary reduction arrangement under a tax-sheltered annuity plan (section 403(b) plan). File 1040nr SIMPLE IRA plan. File 1040nr In 2014, the $255,000 limit increases to $260,000 and the $17,500 limit remains at $17,500. File 1040nr Catch-up contributions. File 1040nr   A SARSEP can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. File 1040nr The catch-up contribution limit for 2013 is $5,500 and remains at $5,500 for 2014. File 1040nr Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the elective deferral limit (the lesser of 25% of compensation or $17,500), the SARSEP ADP test limit discussed earlier, or the plan limit (if any). File 1040nr However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. File 1040nr The catch-up contribution limit. File 1040nr The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. File 1040nr   Catch-up contributions are not subject to the elective deferral limit (the lesser of 25% of compensation or $17,500 in 2013 and in 2014). File 1040nr Overall limit on SEP contributions. File 1040nr   If you also make nonelective contributions to a SEP-IRA, the total of the nonelective and elective contributions to that SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000 for 2013 ($52,000 for 2014). File 1040nr The same rule applies to contributions you make to your own SEP-IRA. File 1040nr See Contribution Limits , earlier. File 1040nr Figuring the elective deferral. File 1040nr   For figuring the 25% limit on elective deferrals, compensation does not include SEP contributions, including elective deferrals or other amounts deferred in certain employee benefit plans. File 1040nr Tax Treatment of Deferrals Elective deferrals that are not more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. File 1040nr However, these deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. File 1040nr Excess deferrals. File 1040nr   For 2013, excess deferrals are the elective deferrals for the year that are more than the $17,500 limit discussed earlier. File 1040nr For a participant who is eligible to make catch-up contributions, excess deferrals are the elective deferrals that are more than $23,000. File 1040nr The treatment of excess deferrals made under a SARSEP is similar to the treatment of excess deferrals made under a qualified plan. File 1040nr See Treatment of Excess Deferrals under Elective Deferrals (401(k) Plans) in chapter 4. File 1040nr Excess SEP contributions. File 1040nr   Excess SEP contributions are elective deferrals of highly compensated employees that are more than the amount permitted under the SARSEP ADP test. File 1040nr You must notify your highly compensated employees within 2½ months after the end of the plan year of their excess SEP contributions. File 1040nr If you do not notify them within this time period, you must pay a 10% tax on the excess. File 1040nr For an explanation of the notification requirements, see Rev. File 1040nr Proc. File 1040nr 91-44, 1991-2 C. File 1040nr B. File 1040nr 733. File 1040nr If you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for that form. File 1040nr Reporting on Form W-2. File 1040nr   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. File 1040nr You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. File 1040nr You must also include them in box 12. File 1040nr Mark the “Retirement plan” checkbox in box 13. File 1040nr For more information, see the Form W-2 instructions. File 1040nr Distributions (Withdrawals) As an employer, you cannot prohibit distributions from a SEP-IRA. File 1040nr Also, you cannot make your contributions on the condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts. File 1040nr Distributions are subject to IRA rules. File 1040nr Generally, you or your employee must begin to receive distributions from a SEP-IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. File 1040nr For more information about IRA rules, including the tax treatment of distributions, rollovers, required distributions, and income tax withholding, see Publication 590. File 1040nr Additional Taxes The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions. File 1040nr Making excess contributions. File 1040nr Making early withdrawals. File 1040nr Not making required withdrawals. File 1040nr For information about these taxes, see chapter 1 in Publication 590. File 1040nr Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next. File 1040nr Prohibited transaction. File 1040nr   If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. File 1040nr In that case, the SEP-IRA will no longer qualify as an IRA. File 1040nr For a list of prohibited transactions, see Prohibited Transactions in chapter 4. File 1040nr Effects on employee. File 1040nr   If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred. File 1040nr The employee must include in income the fair market value of the assets (on the first day of the year) that is more than any cost basis in the account. File 1040nr Also, the employee may have to pay the additional tax for making early withdrawals. File 1040nr Reporting and Disclosure Requirements If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up. File 1040nr See Setting Up a SEP , earlier. File 1040nr Also, you must give your eligible employees a statement each year showing any contributions to their SEP-IRAs. File 1040nr You must also give them notice of any excess contributions. File 1040nr For details about other information you must give them, see the instructions for Form 5305-SEP or Form 5305A-SEP (for a salary reduction SEP). File 1040nr Even if you did not use Form 5305-SEP or Form 5305A-SEP to set up your SEP, you must give your employees information similar to that described above. File 1040nr For more information, see the instructions for either Form 5305-SEP or Form 5305A-SEP. File 1040nr Prev  Up  Next   Home   More Online Publications
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The File 1040nr

File 1040nr Publication 575 - Main Content Table of Contents General InformationPension. File 1040nr Annuity. File 1040nr Qualified employee plan. File 1040nr Qualified employee annuity. File 1040nr Designated Roth account. File 1040nr Tax-sheltered annuity plan. File 1040nr Fixed-period annuities. File 1040nr Annuities for a single life. File 1040nr Joint and survivor annuities. File 1040nr Variable annuities. File 1040nr Disability pensions. File 1040nr Variable Annuities Section 457 Deferred Compensation Plans Disability Pensions Insurance Premiums for Retired Public Safety Officers Railroad Retirement Benefits Withholding Tax and Estimated Tax Cost (Investment in the Contract)Foreign employment contributions while a nonresident alien. File 1040nr Taxation of Periodic PaymentsPeriod of participation. File 1040nr Fully Taxable Payments Partly Taxable Payments Taxation of Nonperiodic PaymentsFiguring the Taxable Amount Loans Treated as Distributions Transfers of Annuity Contracts Lump-Sum Distributions RolloversExceptions. File 1040nr No tax withheld. File 1040nr Partial rollovers. File 1040nr Frozen deposits. File 1040nr Reasonable period of time. File 1040nr 20% Mandatory withholding. File 1040nr How to report. File 1040nr How to report. File 1040nr Special rule for Roth IRAs and designated Roth accounts. File 1040nr Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. File 1040nr How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. File 1040nr   Some of the terms used in this publication are defined in the following paragraphs. File 1040nr Pension. File 1040nr   A pension is generally a series of definitely determinable payments made to you after you retire from work. File 1040nr Pension payments are made regularly and are based on such factors as years of service and prior compensation. File 1040nr Annuity. File 1040nr   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. File 1040nr They can be either fixed (under which you receive a definite amount) or variable (not fixed). File 1040nr You can buy the contract alone or with the help of your employer. File 1040nr Qualified employee plan. File 1040nr   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. File 1040nr 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). File 1040nr To determine whether your plan is a qualified plan, check with your employer or the plan administrator. File 1040nr Qualified employee annuity. File 1040nr   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. File 1040nr Designated Roth account. File 1040nr   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), 403(b), or 457(b) plan designated as Roth contributions. File 1040nr Elective deferrals that are designated as Roth contributions are included in your income. File 1040nr However, qualified distributions (explained later) are not included in your income. File 1040nr You should check with your plan administrator to determine if your plan will accept designated Roth contributions. File 1040nr Tax-sheltered annuity plan. File 1040nr   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. File 1040nr Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. File 1040nr Types of pensions and annuities. File 1040nr   Pensions and annuities include the following types. File 1040nr Fixed-period annuities. File 1040nr   You receive definite amounts at regular intervals for a specified length of time. File 1040nr Annuities for a single life. File 1040nr   You receive definite amounts at regular intervals for life. File 1040nr The payments end at death. File 1040nr Joint and survivor annuities. File 1040nr   The first annuitant receives a definite amount at regular intervals for life. File 1040nr After he or she dies, a second annuitant receives a definite amount at regular intervals for life. File 1040nr The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. File 1040nr Variable annuities. File 1040nr   You receive payments that may vary in amount for a specified length of time or for life. File 1040nr 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. File 1040nr Disability pensions. File 1040nr   You receive disability payments because you retired on disability and have not reached minimum retirement age. File 1040nr More than one program. File 1040nr   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. File 1040nr 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. File 1040nr Also, you may be considered to have received more than one pension or annuity. File 1040nr Your former employer or the plan administrator should be able to tell you if you have more than one contract. File 1040nr Example. File 1040nr Your employer set up a noncontributory profit-sharing plan for its employees. File 1040nr The plan provides that the amount held in the account of each participant will be paid when that participant retires. File 1040nr 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. File 1040nr 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. File 1040nr Under the pension plan, however, a formula determines the amount of the pension benefits. File 1040nr The amount of contributions is the amount necessary to provide that pension. File 1040nr Each plan is a separate program and a separate contract. File 1040nr 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. File 1040nr Distributions from a designated Roth account are treated separately from other distributions from the plan. File 1040nr Qualified domestic relations order (QDRO). File 1040nr   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. File 1040nr 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. File 1040nr A QDRO may not award an amount or form of benefit that is not available under the plan. File 1040nr   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. File 1040nr 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. File 1040nr The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. File 1040nr The denominator is the present value of all benefits payable to the participant. File 1040nr   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. File 1040nr Variable Annuities 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. File 1040nr 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. File 1040nr 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. File 1040nr The earnings are not taxed until distributed either in a withdrawal or in annuity payments. File 1040nr The taxable part of a distribution is treated as ordinary income. File 1040nr Net investment income tax. File 1040nr   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). File 1040nr For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. File 1040nr 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. File 1040nr Withdrawals. File 1040nr   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. File 1040nr The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. File 1040nr   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). File 1040nr 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. File 1040nr 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). File 1040nr   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. File 1040nr   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. File 1040nr The rest is taxable. File 1040nr   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. File 1040nr If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. File 1040nr Annuity payments. File 1040nr   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. File 1040nr For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. File 1040nr 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. File 1040nr For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. File 1040nr Death benefits. File 1040nr    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. File 1040nr If you choose to receive an annuity, the payments are subject to tax as described above. File 1040nr 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. File 1040nr See Survivors and Beneficiaries , later. File 1040nr Section 457 Deferred Compensation Plans 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. File 1040nr 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. File 1040nr You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. File 1040nr You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. File 1040nr Your 457(b) plan may have a designated Roth account option. File 1040nr If so, you may be able to roll over amounts to the designated Roth account or make contributions. File 1040nr Elective deferrals to a designated Roth account are included in your income. File 1040nr Qualified distributions (explained later) are not included in your income. File 1040nr See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. File 1040nr This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. File 1040nr For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. File 1040nr Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. File 1040nr 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. File 1040nr Nonelective deferred compensation plans for nonemployees (independent contractors). File 1040nr Deferred compensation plans maintained by churches. File 1040nr Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. File 1040nr An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. File 1040nr Disability Pensions 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. File 1040nr 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. File 1040nr Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. File 1040nr You may be entitled to a tax credit if you were permanently and totally disabled when you retired. File 1040nr For information on this credit, see Publication 524. File 1040nr Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. File 1040nr Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. File 1040nr 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. File 1040nr For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. File 1040nr Insurance Premiums for Retired Public Safety Officers 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. File 1040nr The premiums can be for coverage for you, your spouse, or dependents. File 1040nr The distribution must be made directly from the plan to the insurance provider. File 1040nr You can exclude from income the smaller of the amount of the insurance premiums or $3,000. File 1040nr You can only make this election for amounts that would otherwise be included in your income. File 1040nr The amount excluded from your income cannot be used to claim a medical expense deduction. File 1040nr 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. File 1040nr If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. File 1040nr The amount shown in box 2a of Form 1099-R does not reflect this exclusion. File 1040nr Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. File 1040nr Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. File 1040nr Enter “PSO” next to the appropriate line on which you report the taxable amount. File 1040nr 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. File 1040nr Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. File 1040nr These categories are treated differently for income tax purposes. File 1040nr 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. File 1040nr 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. File 1040nr If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2013, 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. File 1040nr S. File 1040nr Railroad Retirement Board (RRB). File 1040nr 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. File 1040nr The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). File 1040nr It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. File 1040nr Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. File 1040nr 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. File 1040nr (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. File 1040nr ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. File 1040nr See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. File 1040nr Form RRB-1099-R is used for U. File 1040nr S. File 1040nr citizens, resident aliens, and nonresident aliens. File 1040nr Nonresident aliens. File 1040nr   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. File 1040nr Nonresident aliens are subject to mandatory U. File 1040nr S. File 1040nr tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. File 1040nr A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. File 1040nr See Tax withholding next for more information. File 1040nr   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. File 1040nr 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. File 1040nr For information on filing requirements for aliens, see Publication 519, U. File 1040nr S. File 1040nr Tax Guide for Aliens. File 1040nr For information on tax treaties between the United States and other countries that may reduce or eliminate U. File 1040nr S. File 1040nr tax on your benefits, see Publication 901, U. File 1040nr S. File 1040nr Tax Treaties. File 1040nr Tax withholding. File 1040nr   To request or change your income tax withholding from SSEB payments, U. File 1040nr S. File 1040nr citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. File 1040nr To elect, revoke, or change your income tax withholding from NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments. File 1040nr If you are a nonresident alien or a U. File 1040nr S. File 1040nr 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. File 1040nr S. File 1040nr tax withholding. File 1040nr Nonresident U. File 1040nr S. File 1040nr citizens cannot elect to be exempt from withholding on payments delivered outside of the U. File 1040nr S. File 1040nr Help from the RRB. File 1040nr   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. File 1040nr S. File 1040nr consulate/Embassy if you reside outside the United States. File 1040nr You can visit the RRB on the Internet at www. File 1040nr rrb. File 1040nr gov. File 1040nr Form RRB-1099-R. File 1040nr   The following discussion explains the items shown on Form RRB-1099-R. File 1040nr The amounts shown on this form are before any deduction for: Federal income tax withholding, Medicare premiums, Legal process garnishment 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. File 1040nr   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. File 1040nr   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. File 1040nr To determine if any of these rules apply to your benefits, see the discussions about them later. File 1040nr   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. File 1040nr Use distribution code “7” if you are asked for a distribution code. File 1040nr Distribution codes are not shown on Form RRB-1099-R. File 1040nr   There are three copies of this form. File 1040nr Copy B is to be included with your income tax return if federal income tax is withheld. File 1040nr Copy C is for your own records. File 1040nr Copy 2 is filed with your state, city, or local income tax return, when required. File 1040nr See the illustrated Copy B (Form RRB-1099-R) above. File 1040nr       Each beneficiary will receive his or her own Form RRB-1099-R. File 1040nr If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. File 1040nr So that you get your form timely, make sure the RRB always has your current mailing address. File 1040nr Please click here for the text description of the image. File 1040nr Form RRB-1099-R Box 1—Claim Number and Payee Code. File 1040nr   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. File 1040nr This is the number under which the RRB paid your benefits. File 1040nr Your payee code follows your claim number and is the last number in this box. File 1040nr It is used by the RRB to identify you under your claim number. File 1040nr In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. File 1040nr Box 2—Recipient's Identification Number. File 1040nr   This is the recipient's U. File 1040nr S. File 1040nr taxpayer identification number. File 1040nr 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. File 1040nr 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. File 1040nr The Instructions for Form W-7 explain how and when to apply. File 1040nr Box 3—Employee Contributions. File 1040nr   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. File 1040nr 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). File 1040nr (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. File 1040nr ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. File 1040nr It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. File 1040nr If this amount has changed, the change is retroactive. File 1040nr You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. File 1040nr If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. File 1040nr    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. File 1040nr Box 4—Contributory Amount Paid. File 1040nr   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. File 1040nr (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. File 1040nr ) This amount is the total contributory pension paid in 2013. File 1040nr It may be partly taxable and partly tax free or fully taxable. File 1040nr 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. File 1040nr Box 5—Vested Dual Benefit. File 1040nr   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. File 1040nr It is fully taxable. File 1040nr VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. File 1040nr Note. File 1040nr The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. File 1040nr Box 6—Supplemental Annuity. File 1040nr   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. File 1040nr It is fully taxable. File 1040nr Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. File 1040nr Box 7—Total Gross Paid. File 1040nr   This is the sum of boxes 4, 5, and 6. File 1040nr The amount represents the total pension paid in 2013. File 1040nr Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. File 1040nr Box 8—Repayments. File 1040nr   This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2013 for years before 2013 or for unknown years. File 1040nr The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. File 1040nr It only includes repayments of benefits that were taxable to you. File 1040nr This means it only includes repayments in 2013 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. File 1040nr If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. File 1040nr For more information about repayments, see Repayment of benefits received in an earlier year , later. File 1040nr    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. File 1040nr Box 9—Federal Income Tax Withheld. File 1040nr   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. File 1040nr Include this on your income tax return as tax withheld. File 1040nr If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2013, you will receive more than one Form RRB-1099-R for 2013. File 1040nr Determine the total amount of U. File 1040nr S. File 1040nr federal income tax withheld from your 2013 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2013 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive. File 1040nr Box 10—Rate of Tax. File 1040nr   If you are taxed as a U. File 1040nr S. File 1040nr citizen or resident alien, this box does not apply to you. File 1040nr 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 2013. File 1040nr If you are a nonresident alien whose tax was withheld at more than one rate during 2013, you will receive a separate Form RRB-1099-R for each rate change during 2013. File 1040nr Box 11—Country. File 1040nr   If you are taxed as a U. File 1040nr S. File 1040nr citizen or resident alien, this box does not apply to you. File 1040nr 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 2013. File 1040nr If you are a nonresident alien who was a resident of more than one country during 2013, you will receive a separate Form RRB-1099-R for each country of residence during 2013. File 1040nr Box 12—Medicare Premium Total. File 1040nr   This is for information purposes only. File 1040nr The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. File 1040nr Medicare premium refunds are not included in the Medicare total. File 1040nr 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). File 1040nr However, if Form RRB-1099 or Form RRB-1042S is not required for 2013, then this total will be shown on Form RRB-1099-R. File 1040nr 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. File 1040nr Repayment of benefits received in an earlier year. File 1040nr   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. File 1040nr   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. File 1040nr The 2%-of-adjusted-gross-income limit applies to this deduction. File 1040nr You cannot take this deduction if you file Form 1040A. File 1040nr    If you repaid more than $3,000 in 2013, 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. File 1040nr For more information, see Repayments in Publication 525. File 1040nr Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. File 1040nr However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. File 1040nr (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. File 1040nr ) 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. File 1040nr See Estimated tax , later. File 1040nr 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. File 1040nr For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. File 1040nr There will be no withholding on any part of a distribution where it is reasonable to believe that it will not be includible in gross income. File 1040nr Choosing no withholding. File 1040nr   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. File 1040nr You can make this choice on Form W-4P for periodic and nonperiodic payments. File 1040nr This choice generally remains in effect until you revoke it. File 1040nr   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. File 1040nr   To choose not to have tax withheld, a U. File 1040nr S. File 1040nr citizen or resident alien must give the payer a home address in the United States or its possessions. File 1040nr Without that address, the payer must withhold tax. File 1040nr For example, the payer has to withhold tax if the recipient has provided a U. File 1040nr S. File 1040nr address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. File 1040nr S. File 1040nr home address. File 1040nr   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. File 1040nr S. File 1040nr citizen, a U. File 1040nr S. File 1040nr resident alien, or someone who left the country to avoid tax. File 1040nr But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. File 1040nr This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. File 1040nr For details, get Publication 519. File 1040nr Periodic payments. File 1040nr   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. File 1040nr 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). File 1040nr You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). File 1040nr If you do not, tax will be withheld as if you were married and claiming three withholding allowances. File 1040nr   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. File 1040nr   You must file a new withholding certificate to change the amount of withholding. File 1040nr Nonperiodic distributions. File 1040nr    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. File 1040nr You can also ask the payer to withhold an additional amount using Form W-4P. File 1040nr 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. File 1040nr Eligible rollover distribution. File 1040nr    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. File 1040nr You cannot choose not to have tax withheld from an eligible rollover distribution. File 1040nr 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. File 1040nr For more information about eligible rollover distributions, see Rollovers , later. File 1040nr Estimated tax. File 1040nr   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. File 1040nr Generally, you must make estimated tax payments for 2014 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 2014 return, or 100% of the tax shown on your 2013 return. File 1040nr If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. File 1040nr For more information, get Publication 505, Tax Withholding and Estimated Tax. File 1040nr 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. File 1040nr See Publication 915. File 1040nr You can choose to have income tax withheld from those benefits. File 1040nr Use Form W-4V to make this choice. File 1040nr Cost (Investment in the Contract) Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). File 1040nr If any part of a distribution is treated as a recovery of your cost under the rules explained in this publication, that part is tax free. File 1040nr Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. File 1040nr In general, your cost is your net investment in the contract as of the annuity starting date (or the date of the distribution, if earlier). File 1040nr To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. File 1040nr This includes the amounts your employer contributed that were taxable to you when paid. File 1040nr (However, see Foreign employment contributions , later. File 1040nr ) It does not include amounts withheld from your pay on a tax-deferred basis (money that was taken out of your gross pay before taxes were deducted). File 1040nr It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). File 1040nr From this total cost you must subtract the following amounts. File 1040nr Any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income and that you received by the later of the annuity starting date or the date on which you received your first payment. File 1040nr Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). File 1040nr If you must use the Simplified Method for your annuity payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. File 1040nr (See Simplified Method , later, for information on its required use. File 1040nr ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. File 1040nr (See General Rule , later, for information on its use. File 1040nr ) Your annuity contract has a refund feature if the annuity payments are for your life (or the lives of you and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated amount or a stated number of payments are made. File 1040nr For more information, see Publication 939. File 1040nr The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . File 1040nr Form 1099-R. File 1040nr If you began receiving periodic payments of a life annuity in 2013, the payer should show your total contributions to the plan in box 9b of your 2013 Form 1099-R. File 1040nr Annuity starting date defined. File 1040nr   Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. File 1040nr Example. File 1040nr On January 1, you completed all your payments required under an annuity contract providing for monthly payments starting on August 1 for the period beginning July 1. File 1040nr The annuity starting date is July 1. File 1040nr This is the date you use in figuring the cost of the contract and selecting the appropriate number from Table 1 for line 3 of the Simplified Method Worksheet. File 1040nr Designated Roth accounts. File 1040nr   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. File 1040nr Your cost will also include any in-plan Roth rollovers you included in income. File 1040nr Foreign employment contributions. File 1040nr   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. File 1040nr The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (not including the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) but only if the contributions would be excludible from your gross income had they been paid directly to you. File 1040nr Foreign employment contributions while a nonresident alien. File 1040nr   In determining your cost, special rules apply if you are a U. File 1040nr S. File 1040nr citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. File 1040nr Your contributions and your employer's contributions are not included in your cost if the contribution: Was made based on compensation which was for services performed outside the United States while you were a nonresident alien, and Was not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if paid as cash compensation when the services were performed. File 1040nr Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. File 1040nr 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). File 1040nr These payments are also known as amounts received as an annuity. File 1040nr If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. File 1040nr In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. File 1040nr The amount of each payment that is more than the part that represents your cost is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). File 1040nr Designated Roth accounts. File 1040nr   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. File 1040nr This applies to both your cost in the account and income earned on that account. File 1040nr A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. File 1040nr   If the distribution is not a qualified distribution, the rules discussed in this section apply. File 1040nr The designated Roth account is treated as a separate contract. File 1040nr Period of participation. File 1040nr   The 5-tax-year period of participation is the 5-tax-year period beginning with the first tax year for which the participant made a designated Roth contribution to the plan. File 1040nr Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. File 1040nr   However, if a direct rollover is made to the plan from a designated Roth account under another plan, the 5-tax-year period for the recipient plan begins with the first tax year for which the participant first had designated Roth contributions made to the other plan. File 1040nr   Your 401(k), 403(b), or 457(b) plan may permit you to roll over amounts from those plans to a designated Roth account within the same plan. File 1040nr This is known as an in-plan Roth rollover. File 1040nr For more details, see In-plan Roth rollovers , later. File 1040nr Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no cost in the contract because any of the following situations applies to you (however, see Insurance Premiums for Retired Public Safety Officers , earlier). File 1040nr You did not pay anything or are not considered to have paid anything for your pension or annuity. File 1040nr Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. File 1040nr Your employer did not withhold contributions from your salary. File 1040nr You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). File 1040nr Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. File 1040nr You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. File 1040nr Deductible voluntary employee contributions. File 1040nr   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. File 1040nr Accumulated deductible voluntary employee contributions include net earnings on the contributions. File 1040nr If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. File 1040nr Partly Taxable Payments If you have a cost to recover from your pension or annuity plan (see Cost (Investment in the Contract) , earlier), you can exclude part of each annuity payment from income as a recovery of your cost. File 1040nr This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. File 1040nr The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). File 1040nr You figure the tax-free part of the payment using one of the following methods. File 1040nr Simplified Method. File 1040nr You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). File 1040nr You cannot use this method if your annuity is paid under a nonqualified plan. File 1040nr General Rule. File 1040nr You must use this method if your annuity is paid under a nonqualified plan. File 1040nr You generally cannot use this method if your annuity is paid under a qualified plan. File 1040nr You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. File 1040nr If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. File 1040nr Qualified plan annuity starting before November 19, 1996. File 1040nr   If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract) ) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. File 1040nr If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. File 1040nr If you used the Three-Year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable. File 1040nr Exclusion limit. File 1040nr   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. File 1040nr Once your annuity starting date is determined, it does not change. File 1040nr If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. File 1040nr That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. File 1040nr Exclusion limited to cost. File 1040nr   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. File 1040nr Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. File 1040nr This deduction is not subject to the 2%-of-adjusted-gross-income limit. File 1040nr Example 1. File 1040nr Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. File 1040nr The total cost of your annuity is $12,000. File 1040nr Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). File 1040nr After that, your annuity payments are generally fully taxable. File 1040nr Example 2. File 1040nr The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. File 1040nr You have recovered tax free only $9,600 (8 × $1,200) of your cost. File 1040nr An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. File 1040nr Exclusion not limited to cost. File 1040nr   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. File 1040nr If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. File 1040nr The total exclusion may be more than your cost. File 1040nr Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. File 1040nr For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. File 1040nr For any other annuity, this number is the number of monthly annuity payments under the contract. File 1040nr Who must use the Simplified Method. File 1040nr   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. File 1040nr You receive your pension or annuity payments from any of the following plans. File 1040nr A qualified employee plan. File 1040nr A qualified employee annuity. File 1040nr A tax-sheltered annuity plan (403(b) plan). File 1040nr On your annuity starting date, at least one of the following conditions applies to you. File 1040nr You are under age 75. File 1040nr You are entitled to less than 5 years of guaranteed payments. File 1040nr Guaranteed payments. File 1040nr   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. File 1040nr If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. File 1040nr Annuity starting before November 19, 1996. File 1040nr   If your annuity starting date is after July 1, 1986, and before November 19, 1996, and you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. File 1040nr You could have chosen to use the Simplified Method if your annuity is payable for your life (or the lives of you and your survivor annuitant) and you met both of the conditions listed earlier under Who must use the Simplified Method . File 1040nr Who cannot use the Simplified Method. File 1040nr   You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise do not meet the conditions described in the preceding discussion. File 1040nr See General Rule , later. File 1040nr How to use the Simplified Method. File 1040nr    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. File 1040nr Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. File 1040nr   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. File 1040nr How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. File 1040nr For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. File 1040nr    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. File 1040nr Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. File 1040nr Single-life annuity. File 1040nr   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. File 1040nr Enter on line 3 the number shown for your age on your annuity starting date. File 1040nr This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. File 1040nr Multiple-lives annuity. File 1040nr   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. File 1040nr Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. File 1040nr For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. File 1040nr For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. File 1040nr Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. File 1040nr   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. File 1040nr Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. File 1040nr This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. File 1040nr Fixed-period annuity. File 1040nr   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. File 1040nr Line 6. File 1040nr   The amount on line 6 should include all amounts that could have been recovered in prior years. File 1040nr If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. File 1040nr Example. File 1040nr Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. File 1040nr Bill's annuity starting date is January 1, 2013. File 1040nr The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. File 1040nr Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. File 1040nr Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. File 1040nr Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. File 1040nr Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of Worksheet A in completing line 3 of the worksheet. File 1040nr His completed worksheet is shown later. File 1040nr Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. File 1040nr Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. File 1040nr The full amount of any annuity payments received after 310 payments are paid must be included in gross income. File 1040nr If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. File 1040nr This deduction is not subject to the 2%-of-adjusted-gross-income limit. File 1040nr Worksheet A. File 1040nr Simplified Method Worksheet for Bill Smith 1. File 1040nr Enter the total pension or annuity payments received this year. File 1040nr Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. File 1040nr $14,400 2. File 1040nr Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. File 1040nr * See Cost (Investment in the Contract) , earlier 2. File 1040nr 31,000   Note. File 1040nr 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). File 1040nr Otherwise, go to line 3. File 1040nr     3. File 1040nr Enter the appropriate number from Table 1 below. File 1040nr 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. File 1040nr 310 4. File 1040nr Divide line 2 by the number on line 3 4. File 1040nr 100 5. File 1040nr Multiply line 4 by the number of months for which this year's payments were made. File 1040nr If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. File 1040nr Otherwise, go to line 6 5. File 1040nr 1,200 6. File 1040nr Enter any amount previously recovered tax free in years after 1986. File 1040nr This is the amount shown on line 10 of your worksheet for last year 6. File 1040nr -0- 7. File 1040nr Subtract line 6 from line 2 7. File 1040nr 31,000 8. File 1040nr Enter the smaller of line 5 or line 7 8. File 1040nr 1,200 9. File 1040nr Taxable amount for year. File 1040nr Subtract line 8 from line 1. File 1040nr Enter the result, but not less than zero. File 1040nr Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. File 1040nr Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. File 1040nr If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. File 1040nr $13,200 10. File 1040nr Was your annuity starting date before 1987? □ Yes. File 1040nr STOP. File 1040nr Do not complete the rest of this worksheet. File 1040nr  ☑ No. File 1040nr Add lines 6 and 8. File 1040nr This is the amount you have recovered tax free through 2013. File 1040nr You will need this number if you need to fill out this worksheet next year 10. File 1040nr 1,200 11. File 1040nr Balance of cost to be recovered. File 1040nr Subtract line 10 from line 2. File 1040nr If zero, you will not have to complete this worksheet next year. File 1040nr The payments you receive next year will generally be fully taxable 11. File 1040nr $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. File 1040nr           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. File 1040nr . File 1040nr . File 1040nr BEFORE November 19, 1996, enter on line 3. File 1040nr . File 1040nr . File 1040nr AFTER November 18, 1996, enter on line 3. File 1040nr . File 1040nr . File 1040nr     55 or under 300 360     56-60 260 310     61-65 240 260     66-70 170 210     71 or older 120 160     Table 2 for Line 3 Above     IF the combined ages at  annuity starting date were. File 1040nr . File 1040nr . File 1040nr THEN enter on line 3. File 1040nr . File 1040nr . File 1040nr     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. File 1040nr   If you and one or more other annuitants receive payments at the same time, you exclude from each annuity payment a pro rata share of the monthly tax-free amount. File 1040nr Figure your share by taking the following steps. File 1040nr Complete your worksheet through line 4 to figure the monthly tax-free amount. File 1040nr Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. File 1040nr Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. File 1040nr The result is your share of the monthly tax-free amount. File 1040nr   Replace the amount on line 4 of the worksheet with the result in (3) above. File 1040nr Enter that amount on line 4 of your worksheet each year. File 1040nr General Rule Under the General Rule, you determine the tax-free part of each annuity payment based on the ratio of the cost of the contract to the total expected return. File 1040nr Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. File 1040nr To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. File 1040nr Who must use the General Rule. File 1040nr   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. File 1040nr Annuity starting before November 19, 1996. File 1040nr   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. File 1040nr You also had to use it for any fixed-period annuity. File 1040nr If you did not have to use the General Rule, you could have chosen to use it. File 1040nr If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. File 1040nr   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. File 1040nr Who cannot use the General Rule. File 1040nr   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. File 1040nr See Simplified Method , earlier. File 1040nr More information. File 1040nr   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. File 1040nr Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. File 1040nr Nonperiodic distributions are also known as amounts not received as an annuity. File 1040nr They include all payments other than periodic payments and corrective distributions. File 1040nr For example, the following items are treated as nonperiodic distributions. File 1040nr Cash withdrawals. File 1040nr Distributions of current earnings (dividends) on your investment. File 1040nr However, do not include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract. File 1040nr Certain loans. File 1040nr See Loans Treated as Distributions , later. File 1040nr The value of annuity contracts transferred without full and adequate consideration. File 1040nr See Transfers of Annuity Contracts , later. File 1040nr Corrective distributions of excess plan contributions. File 1040nr   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. File 1040nr To correct an excess, your plan may distribute it to you (along with any income earned on the excess). File 1040nr Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. File 1040nr It is not subject to the allocation rules explained in the following discussion, it cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. File 1040nr    If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “P,” or “E” in box 7. File 1040nr   For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. File 1040nr Figuring the Taxable Amount How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. File 1040nr If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. File 1040nr If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. File 1040nr You may be able to roll over the taxable amount of a nonperiodic distribution from a qualified retirement plan into another qualified retirement plan or a traditional IRA tax free. File 1040nr See Rollovers, later. File 1040nr If you do not make a tax-free rollover and the distribution qualifies as a lump-sum distribution, you may be able to elect an optional method of figuring the tax on the taxable amount. File 1040nr See Lump-Sum Distributions, later. File 1040nr Annuity starting date. File 1040nr   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. File 1040nr Distributions of employer securities. File 1040nr    If you receive a distribution of employer securities from a qualified retirement plan, you may be able to defer the tax on the net unrealized appreciation (NUA) in the securities. File 1040nr The NUA is the net increase in the securities' value while they were in the trust. File 1040nr This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. File 1040nr   If the distribution is a lump-sum distribution, tax is deferred on all of the NUA unless you choose to include it in your income for the year of the distribution. File 1040nr    A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance (within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. File 1040nr    If you choose to include NUA in your income for the year of the distribution and the participant was born before January 2, 1936, you may be able to figure the tax on the NUA using the optional methods described und