How to Report Benefits From Pensions and TSP
- 1). Review your tax records. You should receive a 1099-R for any income received from the TSP, IRAs, pensions or annuities. Separate the IRA and TSP 1099-R forms into one pile and the pension and annuity forms into a second pile.
- 2). Report your IRA and TSP distributions on line 15 of your Form 1040. Any taxes withheld should be added to line 61, titled federal income tax withheld from Forms W-2 and 1099-R. Attach the 1099-R to the tax return document. You may not use a 1040EZ form if you have pensions or TSP payments.
- 3). Look up your retirement date if you contributed to the pension. If you retired before November 18, 1996, you must use the General Rule to figure any taxable portion of your pension. Using this rule, you'll use IRS life expectancy tables to determine the tax-free and taxable portions of your pension. If you retired after November 18, 1996, you may use either the General Rule or Simplified Method to calculate your taxable portion. Use IRS tables to complete your taxes using either method.
- 4). Report your pension income on line 16 of Form 1040, or line 12 of Form 1040A. Keep any worksheets you used to determine the taxable amount. They'll be helpful when computing any partially taxable portions of your income when preparing your tax return in future years.
- 5). Inquire with your state treasurer about state taxation of your pension plan. Ten states exempt the entire pension annuity, while nine states don't have state income taxes. Four states waive a portion of the tax load or the entire payment for a portion of federal workers. Because every state is different, your state treasurer should be able to walk you through the rules in your particular state.
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