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Review Tax Act 2010

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Review Tax Act 2010

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Understanding your CP21E Notice

As a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes.

Tax publications you may find useful

How to get help

Calling the toll free number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice and audit report carefully ― these will explain why you owe money on your taxes.
  • Pay the amount owed by the date on the notice's payment coupon.
  • Make payment arrangements if you can't pay the full amount you owe.
  • Contact us if you disagree with the change(s) we made.
  • Correct the copy of your tax return that you kept for your records.

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Answers to Common Questions

What should I do if I disagree with the changes you made?
If you've information relevant to your audit that we've not already considered and you've not already paid your bill in full, you may request an Audit Reconsideration. Refer to Publication 3598, What You Should Know About the Audit Reconsideration Process for additional information.

If you've already paid the amount due in full, you must file a formal claim using Form 1040X, Amended U.S. Individual Income Tax Return.

If you don't have additional information to provide, but you disagree with the results of your audit, you may appeal your case to the Appeals Office of the IRS. Refer to Publication 5, Your Appeal Rights and How To Prepare a Protest If You Don’t Agree for additional information.

What happens if I can't pay the full amount I owe?
You can arrange to make a payment plan with us if you can't pay the full amount you owe.

Am I charged interest on the money I owe?
If you don't full pay the amount you owe by the date on the payment coupon, interest will accrue on the unpaid balance after that date.

Will I receive a penalty if I can’t pay the full amount?
Yes, you'll receive a late payment penalty. You can contact us at the number listed on your notice if you’re unable to pay the full amount shown in your specific notice because of circumstances beyond your control. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty.

Can I set up a payment plan?
Yes. Call the toll-free number listed on the top right corner of your notice to discuss payment options or check out more information on payment options and how to make a payment arrangement.

There are other options, such as paying by credit card. Note: There may be a fee to pay by credit card.

What if I need to make another correction to my account?
You'll need to file Form 1040X, Amended U.S. Individual Income Tax Return.

What if I have tried to get answers and after contacting IRS several times have not been successful?
Call Taxpayer Advocate at 1-877-777-4778 or for TTY/TDD 1-800-829-4059.

The changes you have proposed are the result of actions by my spouse that I knew nothing about. Am I responsible for paying this bill?
You may qualify for innocent spouse relief. To request relief, you must file Form 8857, Request for Innocent Spouse Relief no later than 2 years after the date on which the IRS first attempted to collect the tax from you. Refer to Publication 971, Innocent Spouse Relief for additional information.

Page Last Reviewed or Updated: 26-Feb-2014

The Review Tax Act 2010

Review tax act 2010 Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. Review tax act 2010 A pension is generally a series of payments made to you after you retire from work. Review tax act 2010 Pension payments are made regularly and are for past services with an employer. Review tax act 2010 An annuity is a series of payments under a contract. Review tax act 2010 You can buy the contract alone or you can buy it with the help of your employer. Review tax act 2010 Annuity payments are made regularly for more than one full year. Review tax act 2010 Note. Review tax act 2010 Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. Review tax act 2010 Types of pensions and annuities. Review tax act 2010   Particular types of pensions and annuities include: Fixed period annuities. Review tax act 2010 You receive definite amounts at regular intervals for a definite length of time. Review tax act 2010 Annuities for a single life. Review tax act 2010 You receive definite amounts at regular intervals for life. Review tax act 2010 The payments end at death. Review tax act 2010 Joint and survivor annuities. Review tax act 2010 The first annuitant receives a definite amount at regular intervals for life. Review tax act 2010 After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Review tax act 2010 The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Review tax act 2010 Variable annuities. Review tax act 2010 You receive payments that may vary in amount for a definite length of time or for life. Review tax act 2010 The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. Review tax act 2010 Disability pensions. Review tax act 2010 You are under minimum retirement age and receive payments because you retired on disability. Review tax act 2010 If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. Review tax act 2010 If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. Review tax act 2010 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. Review tax act 2010 This plan must meet Internal Revenue Code requirements. Review tax act 2010 It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. Review tax act 2010 However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. Review tax act 2010 A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Review tax act 2010 A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. Review tax act 2010   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. Review tax act 2010 A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. Review tax act 2010 It does not qualify for most of the tax benefits of a qualified plan. Review tax act 2010 Annuity worksheets. Review tax act 2010   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. Review tax act 2010 Request for a ruling. Review tax act 2010   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. Review tax act 2010 This is treated as a request for a ruling. Review tax act 2010 See Requesting a Ruling on Taxation of Annuity near the end of this publication. Review tax act 2010 Withholding tax and estimated tax. Review tax act 2010   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. Review tax act 2010 If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. Review tax act 2010 Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. Review tax act 2010 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). Review tax act 2010 These payments are also known as amounts received as an annuity. Review tax act 2010 If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. Review tax act 2010 In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. Review tax act 2010 The amount of each payment that is more than the part that represents your net cost is taxable. Review tax act 2010 Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. Review tax act 2010 These terms are explained in the following discussions. Review tax act 2010 Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. Review tax act 2010 First, find your net cost of the contract as of the annuity starting date (defined later). Review tax act 2010 To find this amount, you must first figure the total premiums, contributions, or other amounts paid. Review tax act 2010 This includes the amounts your employer contributed if you were required to include these amounts in income. Review tax act 2010 It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). Review tax act 2010 From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. Review tax act 2010 Any additional premiums paid for double indemnity or disability benefits. Review tax act 2010 Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). Review tax act 2010 The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. Review tax act 2010 Example. Review tax act 2010 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. Review tax act 2010 The annuity starting date is July 1. Review tax act 2010 This is the date you use in figuring your investment in the contract and your expected return (discussed later). Review tax act 2010 Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. Review tax act 2010 Foreign employment. Review tax act 2010   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. Review tax act 2010 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 (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. Review tax act 2010 Foreign employment contributions while a nonresident alien. Review tax act 2010   In determining your cost, special rules apply if you are a U. Review tax act 2010 S. Review tax act 2010 citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. Review tax act 2010 Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were 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 they had been paid as cash compensation when the services were performed. Review tax act 2010 Death benefit exclusion. Review tax act 2010   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. Review tax act 2010 The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. Review tax act 2010 How to adjust your total cost. Review tax act 2010   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. Review tax act 2010 Add it to the cost or unrecovered cost of the annuity at the annuity starting date. Review tax act 2010 See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. Review tax act 2010 Net cost. Review tax act 2010   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. Review tax act 2010 This is the unrecovered investment in the contract as of the annuity starting date. Review tax act 2010 If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. Review tax act 2010 Refund feature. Review tax act 2010   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. Review tax act 2010 Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. Review tax act 2010   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. Review tax act 2010 Zero value of refund feature. Review tax act 2010   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. Review tax act 2010   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). Review tax act 2010   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. Review tax act 2010 Examples. Review tax act 2010 The first example shows how to figure the value of the refund feature when there is only one beneficiary. Review tax act 2010 Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. Review tax act 2010 In both examples, the taxpayer elects to use Tables V through VIII. Review tax act 2010 If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. Review tax act 2010 Example 1. Review tax act 2010 At age 65, Barbara bought for $21,053 an annuity with a refund feature. Review tax act 2010 She will get $100 a month for life. Review tax act 2010 Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. Review tax act 2010 In this case, the contract cost and the total guaranteed return are the same ($21,053). Review tax act 2010 Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. Review tax act 2010 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. Review tax act 2010 For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). Review tax act 2010 In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. Review tax act 2010 Example 2. Review tax act 2010 John died while still employed. Review tax act 2010 His widow, Eleanor, age 48, receives $171 a month for the rest of her life. Review tax act 2010 John's son, Elmer, age 9, receives $50 a month until he reaches age 18. Review tax act 2010 John's contributions to the retirement fund totaled $7,559. Review tax act 2010 45, with interest on those contributions of $1,602. Review tax act 2010 53. Review tax act 2010 The guarantee or total refund feature of the contract is $9,161. Review tax act 2010 98 ($7,559. Review tax act 2010 45 plus $1,602. Review tax act 2010 53). Review tax act 2010 The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. Review tax act 2010 9 $71,614. Review tax act 2010 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. Review tax act 2010 0 5,400. Review tax act 2010 00   3) Total expected return   $77,014. Review tax act 2010 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. Review tax act 2010 45   2) Guaranteed amount (contributions of $7,559. Review tax act 2010 45 plus interest of $1,602. Review tax act 2010 53) $9,161. Review tax act 2010 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. Review tax act 2010 00   4) Net guaranteed amount $3,761. Review tax act 2010 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. Review tax act 2010 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. Review tax act 2010 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Review tax act 2010 See the discussion of expected return, later in this publication. Review tax act 2010 Free IRS help. Review tax act 2010   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. Review tax act 2010 Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Review tax act 2010 The following discussions explain how to figure the expected return with each type of annuity. Review tax act 2010 A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. Review tax act 2010 Fixed period annuity. Review tax act 2010   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. Review tax act 2010 It is the total amount you will get beginning at the annuity starting date. Review tax act 2010 You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). Review tax act 2010 To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. Review tax act 2010 Single life annuity. Review tax act 2010   If you are to get annuity payments for the rest of your life, find your expected return as follows. Review tax act 2010 You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. Review tax act 2010 These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). Review tax act 2010   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. Review tax act 2010 See Adjustments to Tables I, II, V, VI, and VIA following Table I. Review tax act 2010 Example. Review tax act 2010 Henry bought an annuity contract that will give him an annuity of $500 a month for his life. Review tax act 2010 If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. Review tax act 2010 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. Review tax act 2010 2 multiple by +. Review tax act 2010 1. Review tax act 2010 His expected return would then be $115,800 ($6,000 × 19. Review tax act 2010 3). Review tax act 2010 Annuity for shorter of life or specified period. Review tax act 2010   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. Review tax act 2010 To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. Review tax act 2010 Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. Review tax act 2010 Example. Review tax act 2010 Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. Review tax act 2010 She was age 65 at her birthday nearest the annuity starting date. Review tax act 2010 She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. Review tax act 2010 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. Review tax act 2010 See Special Elections, later. Review tax act 2010 Joint and survivor annuities. Review tax act 2010   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. Review tax act 2010 To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. Review tax act 2010 If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. Review tax act 2010 See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. Review tax act 2010 Example. Review tax act 2010 John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. Review tax act 2010 At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. Review tax act 2010 The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. Review tax act 2010 0 Expected return $132,000 Different payments to survivor. Review tax act 2010   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. Review tax act 2010 Example 1. Review tax act 2010 Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. Review tax act 2010 If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. Review tax act 2010 0 Multiple for Gerald, age 70 (from Table V)   16. Review tax act 2010 0 Difference: Multiple applicable to Mary   6. Review tax act 2010 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. Review tax act 2010 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. Review tax act 2010 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. Review tax act 2010 Your husband died while still employed. Review tax act 2010 Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. Review tax act 2010 Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. Review tax act 2010 You were 50 years old at the annuity starting date. Review tax act 2010 Marie was 16 and Jean was 14. Review tax act 2010 Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. Review tax act 2010 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. Review tax act 2010 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. Review tax act 2010 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. Review tax act 2010 Computation Under the General Rule Note. Review tax act 2010 Variable annuities use a different computation for determining the exclusion amounts. Review tax act 2010 See Variable annuities later. Review tax act 2010 Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. Review tax act 2010   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. Review tax act 2010 See Death benefit exclusion , earlier. Review tax act 2010 Step 2. Review tax act 2010   Figure your expected return. Review tax act 2010 Step 3. Review tax act 2010   Divide Step 1 by Step 2 and round to three decimal places. Review tax act 2010 This will give you the exclusion percentage. Review tax act 2010 Step 4. Review tax act 2010   Multiply the exclusion percentage by the first regular periodic payment. Review tax act 2010 The result is the tax-free part of each pension or annuity payment. Review tax act 2010   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. Review tax act 2010 However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. Review tax act 2010   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. Review tax act 2010 Step 5. Review tax act 2010   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. Review tax act 2010 This will give you the tax-free part of the total payment for the year. Review tax act 2010    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. Review tax act 2010 This fractional amount is multiplied by your exclusion percentage to get the tax-free part. Review tax act 2010 Step 6. Review tax act 2010   Subtract the tax-free part from the total payment you received. Review tax act 2010 The rest is the taxable part of your pension or annuity. Review tax act 2010 Example 1. Review tax act 2010 You purchased an annuity with an investment in the contract of $10,800. Review tax act 2010 Under its terms, the annuity will pay you $100 a month for life. Review tax act 2010 The multiple for your age (age 65) is 20. Review tax act 2010 0 as shown in Table V. Review tax act 2010 Your expected return is $24,000 (20 × 12 × $100). Review tax act 2010 Your cost of $10,800, divided by your expected return of $24,000, equals 45. Review tax act 2010 0%. Review tax act 2010 This is the percentage you will not have to include in income. Review tax act 2010 Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. Review tax act 2010 If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). Review tax act 2010 Example 2. Review tax act 2010 Gerald bought a joint and survivor annuity. Review tax act 2010 Gerald's investment in the contract is $62,712 and the expected return is $121,200. Review tax act 2010 The exclusion percentage is 51. Review tax act 2010 7% ($62,712 ÷ $121,200). Review tax act 2010 Gerald will receive $500 a month ($6,000 a year). Review tax act 2010 Each year, until his net cost is recovered, $3,102 (51. Review tax act 2010 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. Review tax act 2010 If Gerald dies, his wife will receive $350 a month ($4,200 a year). Review tax act 2010 If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. Review tax act 2010 7%). Review tax act 2010 Each year, until the entire net cost is recovered, his wife will receive $2,171. Review tax act 2010 40 (51. Review tax act 2010 7% of her payments received of $4,200) tax free. Review tax act 2010 She will include $2,028. Review tax act 2010 60 ($4,200 − $2,171. Review tax act 2010 40) in her income tax return. Review tax act 2010 Example 3. Review tax act 2010 Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. Review tax act 2010 Your two daughters each receive annual annuities of $1,800 until they reach age 18. Review tax act 2010 Your husband contributed $25,576 to the plan. Review tax act 2010 You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. Review tax act 2010 Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. Review tax act 2010 The exclusion percentage of 18. Review tax act 2010 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. Review tax act 2010 Each full year $864 (18. Review tax act 2010 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. Review tax act 2010 Each year, until age 18, $324 (18. Review tax act 2010 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. Review tax act 2010 Part-year payments. Review tax act 2010   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. Review tax act 2010   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. Review tax act 2010 For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. Review tax act 2010   If you received a fractional payment, follow Step 5, discussed earlier. Review tax act 2010 This gives you the tax-free part of your total payment. Review tax act 2010 Example. Review tax act 2010 On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Review tax act 2010 The applicable multiple from Table V is 23. Review tax act 2010 3 (age 61). Review tax act 2010 Her expected return is $34,950 ($125 × 12 × 23. Review tax act 2010 3). Review tax act 2010 Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. Review tax act 2010 1%. Review tax act 2010 Each payment received will consist of 63. Review tax act 2010 1% return of cost and 36. Review tax act 2010 9% taxable income, until her net cost of the contract is fully recovered. Review tax act 2010 During the first year, Mary received three payments of $125, or $375, of which $236. Review tax act 2010 63 (63. Review tax act 2010 1% × $375) is a return of cost. Review tax act 2010 The remaining $138. Review tax act 2010 37 is included in income. Review tax act 2010 Increase in annuity payments. Review tax act 2010   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. Review tax act 2010 All increases in the installment payments are fully taxable. Review tax act 2010   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. Review tax act 2010 72-5(a)(5) of the regulations. Review tax act 2010 Example. Review tax act 2010 Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. Review tax act 2010 In figuring the taxable part, Joe elects to use Tables V through VIII. Review tax act 2010 The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. Review tax act 2010 His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. Review tax act 2010 0 × $1,764 annual payment). Review tax act 2010 The exclusion percentage is $7,938 ÷ $35,280, or 22. Review tax act 2010 5%. Review tax act 2010 During the year he received 11 monthly payments of $147, or $1,617. Review tax act 2010 Of this amount, 22. Review tax act 2010 5% × $147 × 11 ($363. Review tax act 2010 83) is tax free as a return of cost and the balance of $1,253. Review tax act 2010 17 is taxable. Review tax act 2010 Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). Review tax act 2010 The tax-free part is still only 22. Review tax act 2010 5% of the annuity payments as of the annuity starting date (22. Review tax act 2010 5% × $147 × 12 = $396. Review tax act 2010 90 for a full year). Review tax act 2010 The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. Review tax act 2010 Variable annuities. Review tax act 2010   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. Review tax act 2010   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. Review tax act 2010 If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. Review tax act 2010 Example. Review tax act 2010 Frank purchased a variable annuity at age 65. Review tax act 2010 The total cost of the contract was $12,000. Review tax act 2010 The annuity starting date is January 1 of the year of purchase. Review tax act 2010 His annuity will be paid, starting July 1, in variable annual installments for his life. Review tax act 2010 The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. Review tax act 2010   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. Review tax act 2010 Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. Review tax act 2010 The result is added to the previously figured periodic tax-free part. Review tax act 2010 The sum is the amount of each future payment that will be tax free. Review tax act 2010 Example. Review tax act 2010 Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. Review tax act 2010 Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. Review tax act 2010 Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. Review tax act 2010 00 Amount received in second year 500. Review tax act 2010 00 Difference $100. Review tax act 2010 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. Review tax act 2010 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. Review tax act 2010 4) $5. Review tax act 2010 43 Revised annual tax-free part for third and later years ($600 + $5. Review tax act 2010 43) $605. Review tax act 2010 43 Amount taxable in third year ($1,200 − $605. Review tax act 2010 43) $594. Review tax act 2010 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. Review tax act 2010 72–4(d)(3) of the Income Tax Regulations. Review tax act 2010 The statement must also show the following information: The annuity starting date and your age on that date. Review tax act 2010 The first day of the first period for which you received an annuity payment in the current year. Review tax act 2010 Your investment in the contract as originally figured. Review tax act 2010 The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. Review tax act 2010 Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. Review tax act 2010 Exclusion limited to net cost. Review tax act 2010   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). Review tax act 2010 This is the unrecovered investment in the contract as of the annuity starting date. Review tax act 2010   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Review tax act 2010 This deduction is not subject to the 2%-of-adjusted-gross-income limit. Review tax act 2010 Example 1. Review tax act 2010 Your annuity starting date is after 1986. Review tax act 2010 Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. Review tax act 2010 There is no refund feature. Review tax act 2010 Your monthly annuity payment is $833. Review tax act 2010 33. Review tax act 2010 Your exclusion ratio is 12% and you exclude $100 a month. Review tax act 2010 Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. Review tax act 2010 Thereafter, your annuity payments are fully taxable. Review tax act 2010 Example 2. Review tax act 2010 The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. Review tax act 2010 The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. Review tax act 2010 The exclusion ratio is 10. Review tax act 2010 8%, and your monthly exclusion is $90. Review tax act 2010 After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). Review tax act 2010 An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. Review tax act 2010 Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. Review tax act 2010 Exclusion not limited to net cost. Review tax act 2010   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. Review tax act 2010 If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. Review tax act 2010 The total exclusion may be more than your investment in the contract. Review tax act 2010 How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. Review tax act 2010 Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. Review tax act 2010 These tables correspond to the old Tables I through IV. Review tax act 2010 In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. Review tax act 2010 If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. Review tax act 2010 However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). Review tax act 2010 Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. Review tax act 2010 Contributions made both before July 1986 and after June 1986. Review tax act 2010   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. Review tax act 2010 (See the examples below. Review tax act 2010 )    Making the election. Review tax act 2010 Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. Review tax act 2010 72–6 of the Income Tax Regulations. Review tax act 2010 ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. Review tax act 2010   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. Review tax act 2010 You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. Review tax act 2010    Advantages of election. Review tax act 2010 In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. Review tax act 2010    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. Review tax act 2010 If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. Review tax act 2010   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. Review tax act 2010 Example 1. Review tax act 2010 Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. Review tax act 2010 Payment of the $42,000 contribution is guaranteed under a refund feature. Review tax act 2010 Bill is 55 years old as of the annuity starting date. Review tax act 2010 For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. Review tax act 2010       Pre- July 1986   Post- June 1986 A. Review tax act 2010 Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. Review tax act 2010 of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. Review tax act 2010 Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. Review tax act 2010 Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. Review tax act 2010 7   28. Review tax act 2010 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. Review tax act 2010 Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . Review tax act 2010 079   . Review tax act 2010 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). Review tax act 2010 The taxable part of his annuity is $22,080 ($24,000 minus $1,920). Review tax act 2010 If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). Review tax act 2010 Example 2. Review tax act 2010 Al is age 62 at his nearest birthday to the annuity starting date. Review tax act 2010 Al's wife is age 60 at her nearest birthday to the annuity starting date. Review tax act 2010 The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. Review tax act 2010 The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. Review tax act 2010 Al makes the election described in Example 1 . Review tax act 2010 For purposes of this example, assume the refund feature adjustment is zero. Review tax act 2010 If an adjustment is required, IRS will figure the amount. Review tax act 2010 See Requesting a Ruling on Taxation of Annuity near the end of this publication. Review tax act 2010       Pre-  July 1986   Post-  June 1986 A. Review tax act 2010 Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. Review tax act 2010 Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. Review tax act 2010 Expected return         1) Multiple for both annuitants from Tables II and VI 25. Review tax act 2010 4   28. Review tax act 2010 8   2) Multiple for first annuitant from Tables I and V 16. Review tax act 2010 9   22. Review tax act 2010 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. Review tax act 2010 5   6. Review tax act 2010 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. Review tax act 2010 Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . Review tax act 2010 209   . Review tax act 2010 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). Review tax act 2010 The taxable part of his annuity is $9,216 ($12,000 − $2,784). Review tax act 2010 The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. Review tax act 2010 After Al's death, his widow will apply the same exclusion percentages (20. Review tax act 2010 9% and 2. Review tax act 2010 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. Review tax act 2010 Annuity received after June 30, 1986. Review tax act 2010   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. Review tax act 2010 Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. Review tax act 2010    Make the election by attaching the following statement to your income tax return. Review tax act 2010    “I elect, under section 1. Review tax act 2010 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. Review tax act 2010 ”   The statement must also include your name, address, and social security number. Review tax act 2010   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. Review tax act 2010 Disqualifying form of payment or settlement. Review tax act 2010   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. Review tax act 2010 See regulations section 1. Review tax act 2010 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. Review tax act 2010 You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. Review tax act 2010 Worksheets for Determining Taxable Annuity Worksheets I and II. Review tax act 2010   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. Review tax act 2010 72–6(d)(6) Election. Review tax act 2010 Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Review tax act 2010 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. Review tax act 2010   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Review tax act 2010 )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Review tax act 2010 If not, the IRS will calculate the refund feature percentage. Review tax act 2010             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Review tax act 2010   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. Review tax act 2010   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. Review tax act 2010   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Review tax act 2010     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Review tax act 2010 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. Review tax act 2010   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Review tax act 2010 )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Review tax act 2010 If not, the IRS will calculate the refund feature percentage. Review tax act 2010             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Review tax act 2010   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. Review tax act 2010   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. Review tax act 2010 Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. Review tax act 2010   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Review tax act 2010   Actuarial Tables Please click here for the text description of the image. Review tax act 2010 Actuarial Tables Please click here for the text description of the image. Review tax act 2010 Actuarial Tables Please click here for the text description of the image. Review tax act 2010 Actuarial tables Please click here for the text description of the image. 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Review tax act 2010 Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. Review tax act 2010 If you make this request, you are asking for a ruling. Review tax act 2010 User fee. Review tax act 2010   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. Review tax act 2010 You should call the IRS for the proper fee. Review tax act 2010 A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. Review tax act 2010 Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. Review tax act 2010 O. Review tax act 2010 Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. Review tax act 2010 When to make the request. Review tax act 2010   Please note that requests sent between February 1 and April 15 may experience some delay. Review tax act 2010 We process requests in the order received, and we will reply to your request as soon as we can process it. Review tax act 2010 If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. Review tax act 2010 S. Review tax act 2010 Individual Income Tax Return, to get an extension of time to file. Review tax act 2010 Information you must furnish. Review tax act 2010   You must furnish the information listed below so the IRS can comply with your request. Review tax act 2010 Failure to furnish the information will result in a delay in processing your request. Review tax act 2010 Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. Review tax act 2010 Copies of any documents showing distributions, annuity rates, and annuity options available to you. Review tax act 2010 A copy of any Form 1099–R you received since your annuity began. Review tax act 2010 A statement indicating whether you have filed your return for the year for which you are making the request. Review tax act 2010 If you have requested an extension of time to file that return, please indicate the extension date. Review tax act 2010 Your daytime phone number. Review tax act 2010 Your current mailing address. Review tax act 2010 A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. Review tax act 2010 Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. Review tax act 2010 A completed Tax Information Sheet (or facsimile) shown on the next page. Review tax act 2010 Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. Review tax act 2010 This statement must be signed by the retiree or the survivor annuitant. Review tax act 2010 It cannot be signed by a representative. Review tax act 2010 Tax Information Sheet Please click here for the text description of the image. Review tax act 2010 Tax Information Sheet Please click here for the text description of the image. Review tax act 2010 Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Review tax act 2010 Free help with your tax return. Review tax act 2010   You can get free help preparing your return nationwide from IRS-certified volunteers. Review tax act 2010 The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Review tax act 2010 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Review tax act 2010 Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Review tax act 2010 In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Review tax act 2010 To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Review tax act 2010 gov, download the IRS2Go app, or call 1-800-906-9887. Review tax act 2010   As part of the TCE program, AARP offers the Tax-Aide counseling program. Review tax act 2010 To find the nearest AARP Tax-Aide site, visit AARP's website at www. Review tax act 2010 aarp. Review tax act 2010 org/money/taxaide or call 1-888-227-7669. Review tax act 2010 For more information on these programs, go to IRS. Review tax act 2010 gov and enter “VITA” in the search box. Review tax act 2010 Internet. Review tax act 2010    IRS. Review tax act 2010 gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Review tax act 2010 Download the free IRS2Go app from the iTunes app store or from Google Play. Review tax act 2010 Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Review tax act 2010 Check the status of your 2013 refund with the Where's My Refund? application on IRS. Review tax act 2010 gov or download the IRS2Go app and select the Refund Status option. Review tax act 2010 The IRS issues more than 9 out of 10 refunds in less than 21 days. Review tax act 2010 Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Review tax act 2010 You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Review tax act 2010 The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Review tax act 2010 Use the Interactive Tax Assistant (ITA) to research your tax questions. Review tax act 2010 No need to wait on the phone or stand in line. Review tax act 2010 The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Review tax act 2010 When you reach the response screen, you can print the entire interview and the final response for your records. Review tax act 2010 New subject areas are added on a regular basis. Review tax act 2010  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Review tax act 2010 gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Review tax act 2010 You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Review tax act 2010 The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Review tax act 2010 When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Review tax act 2010 Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Review tax act 2010 You can also ask the IRS to mail a return or an account transcript to you. Review tax act 2010 Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Review tax act 2010 gov or by calling 1-800-908-9946. Review tax act 2010 Tax return and tax account transcripts are generally available for the current year and the past three years. Review tax act 2010 Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Review tax act 2010 Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Review tax act 2010 If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Review tax act 2010 Check the status of your amended return using Where's My Amended Return? Go to IRS. Review tax act 2010 gov and enter Where's My Amended Return? in the search box. Review tax act 2010 You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Review tax act 2010 It can take up to 3 weeks from the date you mailed it to show up in our system. Review tax act 2010 Make a payment using one of several safe and convenient electronic payment options available on IRS. Review tax act 2010 gov. Review tax act 2010 Select the Payment tab on the front page of IRS. Review tax act 2010 gov for more information. Review tax act 2010 Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Review tax act 2010 Figure your income tax withholding with the IRS Withholding Calculator on IRS. Review tax act 2010 gov. Review tax act 2010 Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Review tax act 2010 Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Review tax act 2010 gov. Review tax act 2010 Request an Electronic Filing PIN by going to IRS. Review tax act 2010 gov and entering Electronic Filing PIN in the search box. Review tax act 2010 Download forms, instructions and publications, including accessible versions for people with disabilities. Review tax act 2010 Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Review tax act 2010 gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Review tax act 2010 An employee can answer questions about your tax account or help you set up a payment plan. Review tax act 2010 Before you visit, check the Office Locator on IRS. Review tax act 2010 gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Review tax act 2010 If you have a special need, such as a disability, you can request an appointment. Review tax act 2010 Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Review tax act 2010 Apply for an Employer Identification Number (EIN). Review tax act 2010 Go to IRS. Review tax act 2010 gov and enter Apply for an EIN in the search box. Review tax act 2010 Read the Internal Revenue Code, regulations, or other official guidance. Review tax act 2010 Read Internal Revenue Bulletins. Review tax act 2010 Sign up to receive local and national tax news and more by email. Review tax act 2010 Just click on “subscriptions” above the search box on IRS. Review tax act 2010 gov and choose from a variety of options. Review tax act 2010    Phone. Review tax act 2010 You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Review tax act 2010 Download the free IRS2Go app from the iTunes app store or from Google Play. Review tax act 2010 Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Review tax act 2010 gov, or download the IRS2Go app. Review tax act 2010 Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Review tax act 2010 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Review tax act 2010 Mos