1099-R: Should I use the Simplified Method Worksheet to figure my taxable amount?
If your Form 1099-R does not show the taxable amount, you must use the General Rule explained in IRS Publication 939 to figure the taxable part to enter on line 16b. But if your annuity starting date was after July 1, 1986, you may be required to figure the taxable part of your distribution using the Simplified Method.
NOTE: If your Form 1099-R does show a taxable amount, you may be able to report a lower taxable amount by using the Simplified Method.
Q. What is my annuity starting date?
A. 1. What was the first day of the first period for which you received a payment? ____________
2. What was the date that your plan's obligations became fixed? ________________________
3. Enter the later of the dates on line 1 and line 2. This is your annuity starting date.________
Q. Should I use the Simplified Method?
A. You must use the Simplified Method if your annuity starting date (the date on line 3 above) was after July 1, 1986, and you used this method last year to figure the taxable part.
Also, you must use the Simplified Method if your annuity starting date (line 3 above) was after November 18, 1996, and BOTH of the following apply:
1. The payments are from a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan (403(b) plan).
2. On your annuity starting date, at least one of the following is true:
* You were under age 75.
* You are entitled to less than 5 years of guaranteed payments. Your annuity contract provides "guaranteed payments" if a minimum number of payments is payable, even if you and any survivor annuitant do not live to receive the minimum. If that minimum amount is less than the total amount of the payments you are to receive during the first 5 years after payments begin, you are considered to be "entitled to less than 5 years of guaranteed payments".
If your annuity starting date was after November 18, 1996, you meet Condition 1, AND you meet one of the conditions in Condition 2, you must use the Simplified Method.
If you must use the Simplified Method, you can do so within your account on TaxSlayer by clicking the link beside box 2 on your 1099-R entry screen. If you prefer to do it by hand, the Simplified Method Worksheet can be found in the Form 1040 Instructions for line 16.
Q. Can I use the Simplified Method?
A. You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or if you do not meet the conditions described in the "Should I use the Simplified Method?" section above.