Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

H And R Block Free Filing

How To Amend 2008 Tax Return1040 Ez OnlineWhat Can Students Write Off On TaxesIncome Tax AmendmentH&r Block Online TaxesWww Turbotax Com1040ez 2013 Form1040x InstructionsH And R BlockWhere Can I File 2012 Taxes Online FreeIrs Gov Forms2013 Federal Tax Form 1040xAmended Irs Tax FormsFree E FileFiling A 1040x Amended Tax ReturnIrs FormsOregon Tax Return Form 1040ez1040 EzAmendment Tax Return 20121040 Income Tax Form1040 Ez Form 2012H R Block 1040xFree State Return OnlyForm 1040ez2011 1040ez FormEfile 2011 Tax ReturnHow To File 2009 TaxesMilitary Onesource TaxHow To Fill Out 1040ezHand R Block Online2011 Federal Tax Forms 1040How To File Your Own TaxesFree Tax Services OnlineH&r Block Online TaxH&r Block TaxInstructions For Filing An Amended Tax ReturnTax Forms 2011Handr BlockTax Form 1040aIrs Tax Return Forms 2012

H And R Block Free Filing

H and r block free filing Accelerated Cost Recovery System (ACRS) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: ACRS Defined What Can and Cannot Be Depreciated Under ACRSRecovery Property Nonrecovery Property How To Figure the DeductionUnadjusted Basis Classes of Recovery Property Recovery Periods Alternate ACRS Method (Modified Straight Line Method) ACRS Deduction in Short Tax Year DispositionsEarly dispositions of ACRS property other than 15-, 18-, or 19-year real property. H and r block free filing Dispositions — mass asset accounts. H and r block free filing Early dispositions — 15-year real property. H and r block free filing Early dispositions — 18- and 19-year real property. H and r block free filing Depreciation Recapture Topics - This chapter discusses: The definition of ACRS What can and cannot be depreciated under ACRS How to figure the deduction Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization The Accelerated Cost Recovery System (ACRS) applies to property first used before 1987. H and r block free filing It is the name given to tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. H and r block free filing These rules are mandatory and generally apply to tangible property placed in service after 1980 and before 1987. H and r block free filing If you placed property in service during this period, you must continue to figure your depreciation under ACRS. H and r block free filing If you used listed property placed in service after June 18, 1984, less than 50% for business in 1995, see Predominant Use Test in chapter 3. H and r block free filing Listed property includes cars, other means of transportation, and certain computers. H and r block free filing Any additions or improvements placed in service after 1986, including any components of a building (such as plumbing, wiring, storm windows, etc. H and r block free filing ), are depreciated using MACRS, discussed in chapter 3 of Publication 946. H and r block free filing It does not matter that the underlying property is depreciated under ACRS or one of the other methods. H and r block free filing ACRS Defined ACRS consists of accelerated depreciation methods and an alternate ACRS method that could have been elected. H and r block free filing The alternate ACRS method used a recovery percentage based on a modified straight line method. H and r block free filing The law prescribes fixed percentages to be uses for each class of property. H and r block free filing Property depreciable under ACRS is called recovery property. H and r block free filing The recovery class of property determines the recovery period. H and r block free filing Generally, the class life of property places it in a 3-year, 5-year, 10-year, 15-year, 18-year, or 19-year recovery class. H and r block free filing Under ACRS, the prescribed percentages are used to recover the unadjusted basis of recovery property. H and r block free filing To figure a depreciation deduction, you multiply the prescribed percentage for the recovery class by the unadjusted basis of the recovery property. H and r block free filing You must continue to figure your depreciation under ACRS for property placed in service after 1980 and before 1987. H and r block free filing For property you placed in service after 1986, you must use MACRS, discussed in chapter 3 of Publication 946. H and r block free filing What Can and Cannot Be Depreciated Under ACRS ACRS applies to most depreciable tangible property placed in service after 1980 and before 1987. H and r block free filing It includes new or used and real or personal property. H and r block free filing The property must be for use in a trade or business or for the production of income. H and r block free filing Property you acquired before 1981 or after 1986 is not ACRS recovery property. H and r block free filing For information on depreciating property acquired before 1981, see chapter 2. H and r block free filing For information on depreciating property acquired after 1986, see chapter 3 of Publication 946. H and r block free filing Recovery Property Recovery property under ACRS is tangible depreciable property placed in service after 1980 and before 1987. H and r block free filing It generally includes new or used property that you acquired after 1980 and before 1987 for use in your trade or business or for the production of income. H and r block free filing Nonrecovery Property You cannot use ACRS for property you placed in service before 1981 or after 1986. H and r block free filing Nonrecovery property also includes: Intangible property, Property you elected to exclude from ACRS that is properly depreciated under a method of depreciation that is not based on a term of years, Certain public utility property, and Certain property acquired and excluded from ACRS because of the antichurning rules. H and r block free filing Intangible property. H and r block free filing   Intangible property is not depreciated under ACRS. H and r block free filing Property depreciated under methods not expressed in a term of years. H and r block free filing   Certain property depreciated under a method not expressed in a term of years is not depreciated under ACRS. H and r block free filing This included any property: If you made an irrevocable election to exclude such property, and In the first year that you could have claimed depreciation, you properly used the unit-of-production method or any method of depreciation not expressed in a term of years (not including the retirement-replacement-betterment method). H and r block free filing Public utility property. H and r block free filing   Public utility property for which the taxpayer does not use a normalization method of accounting is excluded from ACRS and is subject to depreciation under a special rule. H and r block free filing Additions or improvements to ACRS property after 1986. H and r block free filing   Any additions or improvements placed in service after 1986, including any components of a building (plumbing, wiring, storm windows, etc. H and r block free filing ) are depreciated using MACRS, discussed in chapter 3 of Publication 946. H and r block free filing It does not matter that the underlying property is depreciated under ACRS or one of the other methods. H and r block free filing How To Figure the Deduction After you determine that your property can be depreciated under ACRS, you are ready to figure your deduction. H and r block free filing Because the conventions are built into the percentage table rates, you only need to know the following: The unadjusted basis of your recovery property, The classes of recovery property, The recovery periods, and Whether to use the prescribed percentages based on accelerated methods or percentages based on using the alternate ACRS method. H and r block free filing Unadjusted Basis To figure your ACRS deduction, you multiply the unadjusted basis in your recovery property by its applicable percentage for the year. H and r block free filing Unadjusted basis is the same amount you would use to figure gain on a sale, but it is figured without taking into account any depreciation taken in earlier years. H and r block free filing However, reduce your original basis by the amount of amortization taken on the property and by any section 179 deduction claimed as discussed in chapter 2 of Publication 946. H and r block free filing If you buy property, your unadjusted basis is usually its cost minus any amortized amount and minus any section 179 deduction elected. H and r block free filing If you acquire property in some other way, such as by inheriting it, getting it as a gift, or building it yourself, you figure your unadjusted basis under other rules. H and r block free filing See Publication 551. H and r block free filing Classes of Recovery Property All recovery property under ACRS is in one of the following classes. H and r block free filing The class for your property was determined when you began to depreciate it. H and r block free filing 3-Year Property 3-year property includes automobiles, light-duty trucks (actual unloaded weight less than 13,000 pounds), and tractor units for use over-the-road. H and r block free filing Race horses over 2 years old when placed in service are 3-year property. H and r block free filing Any other horses over 12 years old when you placed them in service are also included in the 3-year property class. H and r block free filing The ACRS percentages for 3-year recovery property are: Recovery Period Percentage 1st year 25% 2nd year 38% 3rd year 37% If you used the percentages above to depreciate your 3-year recovery property, your property, except for certain passenger automobiles, is fully depreciated. H and r block free filing You cannot claim depreciation for this property after 1988. H and r block free filing 5-Year Property 5-year property includes computers, copiers, and equipment, such as office furniture and fixtures. H and r block free filing It also includes single purpose agricultural or horticultural structures and petroleum storage facilities (other than buildings and their structural components). H and r block free filing The ACRS percentages for 5-year recovery property are: Recovery period Percentage 1st year 15% 2nd year 22% 3rd through 5th year 21% If you used the percentages above to depreciate your 5-year recovery property, it is fully depreciated. H and r block free filing You cannot claim depreciation for this property after 1990. H and r block free filing 10-Year Property 10-year property includes certain real property such as theme-park structures and certain public utility property. H and r block free filing Manufactured homes (including mobile homes) and railroad tank cars are also 10-year property. H and r block free filing You do not treat a building, and its structural components, as 10-year property by reason of a change in use after you placed the property in service. H and r block free filing For example, a building (15-year real property) that was placed in service in 1981 and was converted to a theme-park structure in 1986 remains 15-year real property. H and r block free filing The ACRS percentages for 10-year recovery property are: Recovery Period Percentage 1st year 8% 2nd year 14% 3rd year 12% 4th through 6th year 10% 7th through 10th year 9% If you used the percentages above, you cannot claim depreciation for this property after 1995. H and r block free filing Example. H and r block free filing On April 21, 1986, you bought and placed in service a new mobile home for $26,000 to be used as rental property. H and r block free filing You paid $10,000 cash and signed a note for $16,000 giving you an unadjusted basis of $26,000. H and r block free filing On June 8, 1986, you bought and placed in service a used mobile home for use as rental property at a total cost of $11,500. H and r block free filing The total unadjusted basis of your 10-year recovery property placed in service in 1986 was $37,500 ($26,000 + $11,500). H and r block free filing Your ACRS deduction was $3,000 (8% × $37,500). H and r block free filing In 1987, your ACRS deduction was $5,250 (14% × $37,500). H and r block free filing In 1988, your ACRS deduction was $4,500 (12% × $37,500). H and r block free filing In 1989, 1990, and 1991, your ACRS deduction was $3,750 (10% × $37,500). H and r block free filing In 1992, 1993, 1994, and 1995 your deduction for each year is $3,375 (9% × $37,500). H and r block free filing 15-Year Real Property 15-year real property is real property that is recovery property placed in service before March 16, 1984. H and r block free filing It includes all real property, such as buildings, other than that designated as 5-year or 10-year property. H and r block free filing Unlike the 3-, 5-, or 10-year classes of property, the percentages for 15-year real property depend on when you placed the property in service during your tax year. H and r block free filing You could group 15-year real property by month and year placed in service. H and r block free filing In Table 1, at the end of this publication in the Appendix, find the month in your tax year that you placed the property in service in your trade or business or for the production of income. H and r block free filing You use the percentages listed under that month for each year of the recovery period to determine your depreciation deduction each year. H and r block free filing Example. H and r block free filing On March 5, 1984, you placed an apartment building in service in your business. H and r block free filing It is 15-year real property. H and r block free filing After subtracting the value of the land, your unadjusted basis in the building is $250,000. H and r block free filing You use the calendar year as your tax year. H and r block free filing March is the third month of your tax year. H and r block free filing Your ACRS deduction for 1984 was $25,000 (10% × $250,000). H and r block free filing For 1985, the percentage for the third month of the second year of the recovery period is 11%. H and r block free filing Your deduction was $27,500 (11% × $250,000). H and r block free filing For the third, fourth, and fifth years of the recovery period (1986, 1987, and 1988), the percentages are 9%, 8%, and 7%. H and r block free filing For 1989 through 1992, the percentage for the third month is 6%. H and r block free filing Your deduction each year is $15,000 (6% × $250,000). H and r block free filing For 1993, 1994, and 1995, the percentage for the third month is 5%. H and r block free filing Your depreciation deduction is $12,500 (5% × $250,000) for 1993, 1994, and 1995. H and r block free filing Low-Income Housing Low-income housing that was assigned a 15-year recovery period under ACRS includes the following types of property: Federally assisted housing projects where the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act, or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. H and r block free filing Low-income rental housing for which a depreciation deduction for rehabilitation expenditures is allowed. H and r block free filing Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under the provisions of state or local laws that authorize similar subsidies for low-income families. H and r block free filing Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. H and r block free filing The ACRS percentages for low-income housing real property, like the regular 15-year real property percentages, depend on when you placed the property in service. H and r block free filing Find the month in your tax year in Table 2 or 3 at the end of this publication in the Appendix that you first placed the property in service as rental housing. H and r block free filing Use the percentages listed under that month for each year of the recovery period. H and r block free filing Table 2 shows percentages for low-income housing placed in service before May 9, 1985. H and r block free filing Table 3 shows percentages for low-income housing placed in service after May 8, 1985, and before 1987. H and r block free filing Example. H and r block free filing In May 1986, you acquired and placed in service a house that qualified as low-income rental housing under item 3) of the above listing. H and r block free filing You use the calendar year as your tax year. H and r block free filing You use Table C–3 because the property was placed in service after May 8, 1985. H and r block free filing Your unadjusted basis for the property, not including the land, was $59,000. H and r block free filing Your deduction for 1986 through 2001 is shown in the following table. H and r block free filing Year Rate Deduction 1986 8. H and r block free filing 9% $5,251 1987 12. H and r block free filing 1% 7,139 1988 10. H and r block free filing 5% 6,195 1989 9. H and r block free filing 1% 5,369 1990 7. H and r block free filing 9% 4,661 1991 6. H and r block free filing 9% 4,071 1992 5. H and r block free filing 9% 3,481 1993 5. H and r block free filing 2% 3,068 1994 4. H and r block free filing 6% 2,714 1995 4. H and r block free filing 6% 2,714 1996 4. H and r block free filing 6% 2,714 1997 4. H and r block free filing 6% 2,714 1998 4. H and r block free filing 6% 2,714 1999 4. H and r block free filing 5% 2,655 2000 4. H and r block free filing 5% 2,655 2001 1. H and r block free filing 5% 885 18-Year Real Property 18-year real property is real property that is recovery property placed in service after March 15, 1984, and before May 9, 1985. H and r block free filing It includes real property, such as buildings, other than that designated as 5-year, 10-year, 15-year real property, or low-income housing. H and r block free filing The ACRS percentages for 18-year real property depend on when you placed the property in service in your trade or business or for the production of income during your tax year. H and r block free filing There are also tables for 18-year real property in the Appendix. H and r block free filing Table 4 shows the percentages for 18-year real property you placed in service after June 22, 1984, and before May 9, 1985. H and r block free filing Table 5 is for 18-year real property placed in service after March 15, 1984, and before June 23, 1984. H and r block free filing Find the month in your tax year that you placed the property in service in a trade or business or for the production of income. H and r block free filing Use the percentages listed under that month for each year of the recovery period. H and r block free filing Example. H and r block free filing On April 28, 1985, you bought and placed in service a rental house. H and r block free filing The house, not including the land, cost $95,000. H and r block free filing This is your unadjusted basis for the house. H and r block free filing You use the calendar year as your tax year. H and r block free filing Because the house was placed in service after June 22, 1984, and before May 9, 1985, it is 18-year real property. H and r block free filing You use Table 4 to figure your deduction for the house. H and r block free filing April is the fourth month of your tax year. H and r block free filing Your deduction for 1985 through 2003 is shown in the following table. H and r block free filing Year Rate Deduction 1985 7. H and r block free filing 0% $6,650 1986 9. H and r block free filing 0% 8,550 1987 8. H and r block free filing 0% 7,600 1988 7. H and r block free filing 0% 6,650 1989 7. H and r block free filing 0% 6,650 1990 6. H and r block free filing 0% 5,700 1991 5. H and r block free filing 0% 4,750 1992 5. H and r block free filing 0% 4,750 1993 5. H and r block free filing 0% 4,750 1994 5. H and r block free filing 0% 4,750 1995 5. H and r block free filing 0% 4,750 1996 5. H and r block free filing 0% 4,750 1997 5. H and r block free filing 0% 4,750 1998 4. H and r block free filing 0% 3,800 1999 4. H and r block free filing 0% 3,800 2000 4. H and r block free filing 0% 3,800 2001 4. H and r block free filing 0% 3,800 2002 4. H and r block free filing 0% 3,800 2003 1. H and r block free filing 0% 950 19-Year Real Property 19-year real property is real property that is recovery property placed in service after May 8, 1985, and before 1987. H and r block free filing It includes all real property, other than that designated as 5-year, 10-year, 15-year, or 18-year real property, or low-income housing. H and r block free filing The ACRS percentages for 19-year real property depend on when you placed the property in service in a trade or business or for the production of income during your tax year. H and r block free filing Table 6 shows the percentages for 19-year real property. H and r block free filing You find the month in your tax year that you placed the property in service. H and r block free filing You use the percentages listed under that month for each year of the recovery period. H and r block free filing Recovery Periods Each item of recovery property is assigned to a class of property. H and r block free filing The classes of recovery property establish the recovery periods over which the unadjusted basis of items in a class is recovered. H and r block free filing The classes of property are: 3-Year property 5-Year property 10-Year property 15-Year real property Low-income housing 18-Year real property 19-Year real property Alternate ACRS Method (Modified Straight Line Method) ACRS provides an alternate ACRS method that could be elected. H and r block free filing This alternate ACRS method uses a recovery percentage based on a modified straight line method. H and r block free filing This alternate ACRS method generally uses percentages other than those from the tables. H and r block free filing If you elected the alternate ACRS method, you determine the recovery period by using the following schedule. H and r block free filing This schedule is for other than 18- and 19-year real property and low-income housing: In the case of: You could have elected a recovery period of: 3-year property 3, 5, or 12 years 5-year property 5, 12, or 25 years 15-year real property 15, 35, or 45 years Percentages. H and r block free filing   The straight-line percentages for the alternate ACRS method are: Recovery Period Percentage 5 years 20. H and r block free filing 00% 10 years 10. H and r block free filing 00% 12 years 8. H and r block free filing 333% 15 years 6. H and r block free filing 667% 25 years 4. H and r block free filing 00% 35 years 2. H and r block free filing 857%   You apply the percentage to the unadjusted basis(defined earlier) of the property to figure your ACRS deduction. H and r block free filing There are tables for 18- and 19-year real property later in this publication in the Appendix. H and r block free filing For 15-year real property, see 15-year real property, later. H and r block free filing 3-, 5-, and 10-year property. H and r block free filing   If you elected to use an alternate recovery percentage, you have to use the same recovery percentage for all property in that class that you placed in service in that tax year. H and r block free filing This applies throughout the recovery period you selected. H and r block free filing Half-year convention. H and r block free filing   If you elected the alternate method, only a half-year of depreciation was deducted for the year you placed the property in service. H and r block free filing This applied regardless of when in the tax year you placed the property in service. H and r block free filing For each of the remaining years in the recovery period, you take a full year's deduction. H and r block free filing If you hold the property for the entire recovery period, a half-year of depreciation is allowable for the year following the end of the recovery period. H and r block free filing Example. H and r block free filing You operate a small upholstery business. H and r block free filing On March 19, 1986, you bought and placed in service a $13,000 light-duty panel truck to be used in your business and a $500 electric saw. H and r block free filing You elected to use the alternate ACRS method. H and r block free filing You did not elect to take a section 179 deduction. H and r block free filing You decided to recover the cost of the truck, which is 3-year recovery property, over 5 years. H and r block free filing The saw is 5-year property, but you decided to recover its cost over 12 years. H and r block free filing For 1986, your ACRS deduction reflected the half-year convention. H and r block free filing In the first year, you deducted half of the amount determined for a full year. H and r block free filing Your ACRS deduction for 1986 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. H and r block free filing 00     Electric saw   12 years straight line = 8. H and r block free filing 333% 8. H and r block free filing 333% ÷ $500 = $41. H and r block free filing 67 Half-year convention -½ of $41. H and r block free filing 67= 20. H and r block free filing 84 Total ACRS deduction for 1986 $1,320. H and r block free filing 84       You take a full year of depreciation for both the truck and the saw for the years 1987 through 1990. H and r block free filing Your ACRS deduction for each of those years is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600     Electric saw     12 years straight line = 8. H and r block free filing 333% 8. H and r block free filing 333% ÷ $500 = $41. H and r block free filing 67 Total annual ACRS deduction for 1987 through 1990 $2,641. H and r block free filing 67       In 1991, you take a half-year of depreciation for the truck and a full year of depreciation for the saw. H and r block free filing Your ACRS deduction for 1991 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. H and r block free filing 00     Electric saw   12 years straight line = 8. H and r block free filing 333% 8. H and r block free filing 333% ÷ $500 = $41. H and r block free filing 67 Total ACRS deduction for 1991 $1,341. H and r block free filing 67       The truck is fully depreciated after 1991. H and r block free filing You take a full year of depreciation for the saw for the years 1992 through 1997. H and r block free filing Your ACRS deduction for each of those years is as follows: Electric saw     12 years straight line = 8. H and r block free filing 333% 8. H and r block free filing 333% ÷ $500 = $41. H and r block free filing 67 Total annual ACRS deduction for 1992 through 1997 $41. H and r block free filing 67       You take a half-year of depreciation for the saw for 1998. H and r block free filing Your ACRS deduction for 1998 is as follows: Electric saw   12 years straight line = 8. H and r block free filing 333% 8. H and r block free filing 333% ÷ $500 = $41. H and r block free filing 67 Half-year convention -½ of $41. H and r block free filing 67= 20. H and r block free filing 84 Total ACRS deduction for 1998 $20. H and r block free filing 84       The saw is fully depreciated after 1998. H and r block free filing 15-year real property. H and r block free filing   Under ACRS, you could also elect to use the alternate ACRS method for 15-year real property. H and r block free filing The alternate ACRS method allows you to depreciate your 15-year real property using the straight line ACRS method over the alternate recovery periods of 15, 35, or 45 years. H and r block free filing If you selected a 15-year recovery period, you use the percentage (6. H and r block free filing 667%) from the schedule above. H and r block free filing You prorate this percentage for the number of months the property was in service in the first year. H and r block free filing If you selected a 35- or 45-year recovery period, you use either Table 11 or 15. H and r block free filing Alternate periods for 18-year real property. H and r block free filing   For 18-year real property, the alternate recovery periods are 18, 35, or 45 years. H and r block free filing The percentages for 18-year real property under the alternate method are in Tables 7, 8, 10, 11, 14, and 15 in the Appendix. H and r block free filing There are two tables for each alternate recovery period. H and r block free filing One table shows the percentage for property placed in service after June 22, 1984. H and r block free filing The other table has the percentages for property placed in service after March 15, 1984, and before June 23, 1984. H and r block free filing Alternate periods for 19-year real property. H and r block free filing   For 19-year real property, the alternate recovery periods are 19, 35, or 45 years. H and r block free filing If you selected a 19-year recovery period, use Table 9 to determine your deduction. H and r block free filing If you select a 35- or 45-year recovery period, use either Table 13 or 14. H and r block free filing Example. H and r block free filing You placed in service an apartment building on August 3, 1986. H and r block free filing The building is 19-year real property. H and r block free filing The sales contract allocated $300,000 to the building and $100,000 to the land. H and r block free filing You use the calendar year as your tax year. H and r block free filing You chose the alternate ACRS method over a recovery period of 35 years. H and r block free filing For 1986, you figure your ACRS deduction usingTable 13. H and r block free filing August is the eighth month of your tax year. H and r block free filing The percentage from Table 13 for the eighth month is 1. H and r block free filing 1%. H and r block free filing Your deduction was $3,300 ($300,000 ÷ 1. H and r block free filing 1%). H and r block free filing The deduction rate from ACRS Table 13 for years 2 through 20 is 2. H and r block free filing 9% so that your deduction in 1987 through 2005 is $8,700 ($300,000 ÷ 2. H and r block free filing 9%). H and r block free filing Alternate periods for low-income housing. H and r block free filing   For low-income housing, the alternate recovery periods are 15, 35, or 45 years. H and r block free filing If you selected a 15-year period for this property, use 6. H and r block free filing 667% as the percentage. H and r block free filing If you selected a 35- or 45-year period, use either Table 11, 12, or 15. H and r block free filing Election. H and r block free filing   You had to make the election to use the alternate ACRS method by the return due date (including extensions) for the tax year you placed the property in service. H and r block free filing Revocation of election. H and r block free filing   Your election to use an alternate ACRS method, once made, can be changed only with the consent of the Commissioner. H and r block free filing The Commissioner grants consent only in extraordinary circumstances. H and r block free filing Any request for a revocation will be considered a request for a ruling. H and r block free filing ACRS Deduction in Short Tax Year For a tax year that is less than 12 months, the ACRS deduction is prorated on a 12-month basis. H and r block free filing Figure the amount of the ACRS deduction for a short tax year as follows: First, you figure the ACRS deduction for a full year. H and r block free filing You figure this by multiplying the unadjusted basis by the recovery percentage. H and r block free filing You then multiply the ACRS deduction determined for a full tax year by a fraction. H and r block free filing The numerator (top number) of the fraction is the number of months in the short tax year and the denominator (bottom number) is 12. H and r block free filing For example, a corporation placed in service in June 1986 an item of 3-year property with an unadjusted basis of $10,000. H and r block free filing The corporation files a tax return, because of a change in its accounting period, for the 6-month short tax year ending June 30, 1986. H and r block free filing The full year's ACRS deduction for this item is $2,500 ($10,000 ÷ 25%), the first year percentage from the 3-year table. H and r block free filing The ACRS deduction for the short tax year is $1,250 ($2,500 ÷ 6/12). H and r block free filing You use the full ACRS percentages during the remaining years of the recovery period. H and r block free filing For the first tax year after the recovery period, the unrecovered basis will be deductible. H and r block free filing Exception. H and r block free filing   For the tax year in which you placed 15-, 18-, or 19-year real property in service or in the tax year you dispose of it, you compute the ACRS deduction for the number of months that the property is in service during that tax year. H and r block free filing You compute the number of months using either a full month or mid-month convention. H and r block free filing This is true regardless of the number of months in the tax year and the recovery period and method used. H and r block free filing Dispositions A disposition is the permanent withdrawal of property from use in your trade or business or in the production of income. H and r block free filing You can make a withdrawal by sale, exchange, retirement, abandonment, or destruction. H and r block free filing You generally recognize gain or loss on the disposition of an asset by sale. H and r block free filing However, nonrecognition rules can allow you to postpone some gain. H and r block free filing See Publication 544. H and r block free filing If you physically abandon property, you can deduct as a loss the adjusted basis of the asset at the time of its abandonment. H and r block free filing Your intent must be to discard the asset so that you will not use it again or retrieve it for sale, exchange, or other disposition. H and r block free filing Early dispositions. H and r block free filing   The disposal of an asset before the end of its specified recovery period, is referred to as an early disposition. H and r block free filing When an early disposition occurs, the depreciation deduction in the year of disposition depends on the class of property involved. H and r block free filing Early dispositions of ACRS property other than 15-, 18-, or 19-year real property. H and r block free filing   Generally, you get no ACRS deduction for the tax year in which you dispose of or retire recovery property, except for 15-, 18-, and 19-year real property. H and r block free filing This means there is no depreciation deduction under ACRS in the year you dispose of or retire any of your 3-, 5-, or 10-year recovery property. H and r block free filing Dispositions — mass asset accounts. H and r block free filing   The law provides a special rule to avoid the calculation of gain on the disposition of assets from mass asset accounts. H and r block free filing A mass asset account includes items usually minor in value in relation to the group, numerous in quantity, impractical to separately identify, and not usually accounted for on a separate basis, but on a total dollar value. H and r block free filing Examples of mass assets include minor items of office, plant, and store furniture and fixtures. H and r block free filing   Under the special rule, if you elected to use a mass asset account, you recognize gain to the extent of the proceeds from the disposition of the asset. H and r block free filing You leave the unadjusted basis of the property in the account until recovered in future years. H and r block free filing If you did this, include the total proceeds realized from the disposition in income on the tax return for the year of disposition. H and r block free filing Early dispositions — 15-year real property. H and r block free filing   If you dispose of 15-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. H and r block free filing You use a full-month convention. H and r block free filing For a disposition at any time during a particular month before the end of the recovery period, no deduction is allowed for the month of disposition. H and r block free filing This applies whether you use the regular ACRS method or elected the alternate ACRS method. H and r block free filing Example. H and r block free filing You purchased and placed in service a rental house on March 2, 1984, for $98,000 (not including the cost of land). H and r block free filing You file your return based on a calendar year. H and r block free filing Your rate from Table 1 for the third month is 10%. H and r block free filing Your ACRS deduction for 1984 was $9,800 ($98. H and r block free filing 000 ÷ 10%). H and r block free filing For 1985 through 1988, you figured your ACRS deductions using 11%, 9%, 8%, and 7% ÷ $98,000. H and r block free filing For 1989 through 1992, you figured your ACRS deductions using 6% for each year. H and r block free filing The deduction each year was $98,000 ÷ 6%. H and r block free filing For 1993 and 1994, the ACRS deduction is ($98,000 ÷ 5%) $4,900 for each year. H and r block free filing You sell the house on June 1, 1995. H and r block free filing You figure your ACRS deduction for 1995 for the full year and then prorate that amount for the months of use. H and r block free filing The full ACRS deduction for 1995 is $4,900 ($98,000 ÷ 5%). H and r block free filing You then prorate this amount to the 5 months in 1995 during which it was rented. H and r block free filing Your ACRS deduction for 1995 is $2,042 ($4,900 ÷ 5/12). H and r block free filing Early dispositions — 18- and 19-year real property. H and r block free filing   If you dispose of 18- or 19-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. H and r block free filing For 18-year property placed in service before June 23, 1984, use a full-month convention on a disposition. H and r block free filing For 18-year property placed in service after June 22, 1984, and for 19-year property, determine the number of months in use by using the mid-month convention. H and r block free filing Under the mid-month convention,treat real property disposed of any time during a month as disposed of in the middle of that month. H and r block free filing Count the month of disposition as half a month of use. H and r block free filing Example. H and r block free filing You purchased and placed in service a rental house on July 2, 1984, for $100,000 (not including the cost of land). H and r block free filing You file your return based on a calendar year. H and r block free filing Your rate from Table 4 for the seventh month is 4%. H and r block free filing You figured your ACRS deduction for 1984 was $4,000 ($100,000 ÷ 4%). H and r block free filing In 1985 through 1994, your ACRS deductions were 9%, 8%, 8%, 7%, 6%, 6%, 5%, 5%, and 5% ÷ $100,000. H and r block free filing You sell the house on September 24, 1995. H and r block free filing Figure your ACRS deduction for 1995 for the months of use. H and r block free filing The full ACRS deduction for 1995 is $5,000 ($100,000 ÷ 5%). H and r block free filing Prorate this amount for the 8. H and r block free filing 5 months in 1995 that you held the property. H and r block free filing Under the mid-month convention, you count September as half a month. H and r block free filing Your ACRS deduction for 1995 is $3,542 ($5,000 ÷ 8. H and r block free filing 5/12). H and r block free filing Depreciation Recapture If you dispose of property depreciated under ACRS that is section 1245 recovery property, you will generally recognize gain or loss. H and r block free filing Gain recognized on a disposition is ordinary income to the extent of prior depreciation deductions taken. H and r block free filing This recapture rule applies to all personal property in the 3-year, 5-year, and 10-year classes. H and r block free filing You recapture gain on manufactured homes and theme park structures in the 10-year class as section 1245 property. H and r block free filing Section 1245 property generally includes all personal property. H and r block free filing See Section 1245 property in chapter 4 of Publication 544 for more information. H and r block free filing You treat dispositions of section 1250 real property on which you have a gain as section 1245 recovery property. H and r block free filing You recognize gain on this property as ordinary income to the extent of prior depreciation deductions taken. H and r block free filing Section 1250 property includes most real property. H and r block free filing See Section 1250 property in chapter 4 of Publication 544 for more information. H and r block free filing This rule applies to all section 1250 real property except the following property: Any 15-, 18-, or 19-year real property that is residential rental property. H and r block free filing Any 15-, 18-, or 19-year real property that you elected to depreciate using the alternate ACRS method. H and r block free filing Any 15-, 18-, or 19-year real property that is subsidized low-income housing. H and r block free filing For these recapture rules, you treat the section 179 deduction and 50% of the investment credit that reduced your basis as depreciation. H and r block free filing See Publication 544 for further discussion of dispositions of section 1245 and 1250 property. H and r block free filing Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Letter 549C Frequently Asked Questions

Why are you receiving this letter?

To inform you that the type of tax and tax year listed in the letter has been paid.

What do you need to do?

If you owe on another type of tax and tax year(s), you must continue to make your payments.

Who do I need to contact?

You can call us at the telephone number listed in your letter.

Page Last Reviewed or Updated: 30-Jan-2014

The H And R Block Free Filing

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