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Individual Income Tax Guide

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Line 16a & 16b – Pensions and Annuities(a), Taxable Amount (b): The total amount of pension and annuity payments are reported on line 16a and the taxable amount are reported online 16b. Pension and annuity payments include distributions from 401(k), 403(b), and governmental 457(b) plans.

You should receive a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., showing the total amount of your pension and annuity payments before income tax or other deductions were withheld. This amount should be shown in box 1 of Form 1099-R. However, do not include the following payments on lines 16a and 16b. Instead, report them on line 7 (Wages, salaries, tips, etc.).

NOTE: If a 1099-R shows federal income tax withheld and you file a paper return, attach a copy of the 1099-R to your return.

Fully taxable pensions and annuities: Your payments are fully taxable if (a) you did not contribute to the cost (see Cost, below) of your pension or annuity, or (b) you got your entire cost back tax free before 2016. But see “Insurance Premiums for Retired Public Safety Officers,” below. If your pension or annuity is fully taxable, enter the total pension or annuity payments (from Form(s) 1099-R, box 1) on line 16b; do not make an entry on line 16a.

Fully taxable pensions and annuities also include military retirement pay shown on Form 1099-R. For details on military disability pensions, see Publication 525, Taxable and Nontaxable Income. If you received a Form RRB-1099-R, Annuities or Pensions by the Railroad Retirement Board, see Publication 575, Pension and Annuity Income, to find out how to report your benefits.

Partially taxable pensions and annuities: Enter the total pension or annuity payments (from Form 1099-R, box 1) on line 16a. If your Form 1099-R does not show the taxable amount, you must use the General Rule explained in Publication 939, General Rule for Pensions and Annuities, to figure the taxable part to enter on line 16b. But if your annuity starting date (defined later) was after July 1, 1986, see Simplified Method to find out if you must use that method to figure the taxable part.

You can ask the IRS to figure the taxable part for you for a $1,000 fee. For details, see Publication 939.

If your Form 1099-R shows a taxable amount, you can report that amount on line 16b. But you may be able to report a lower taxable amount by using the General Rule or the Simplified Method or if the exclusion for retired public safety officers, discussed next, applies.

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 coverage by an accident or health plan or a long-term care insurance contract. You can do this only if you retired because of disability or because you reached normal retirement age.

The premiums can be for coverage for you, your spouse, or dependents. The distribution must be from a plan maintained by the employer from which you retired as a public safety officer. Also, the distribution must be made directly from the plan to the provider of the accident or health plan or long-term care insurance contract. You can exclude from income the smaller of the amount of the premiums or $3,000. You can only make this election for amounts that would otherwise be included in your income.

An eligible retirement plan is a governmental plan that is:

If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. The amount shown in box 2a of Form 1099-R does not reflect the exclusion. Report your total distributions on line 16a and the taxable amount on line 16b. Enter “PSO” next to line 16b. If you are retired on disability and reporting your disability pension on line 7, include only the taxable amount on that line and enter “PSO” and the amount excluded on the dotted line next to line 7.

Chapter 2 – Income

Page 5, Form 1040, Line 16