Form 1099-R - Pensions, Retirement, etc.

Form 1099-R reports distributions a taxpayer receives from Pensions, Retirement Plans, Profit-Sharing Plans, Annuities, Individual Retirement Accounts or IRAs, Insurance Contracts, etc. 

• If money was taken from a retirement account, a taxpayer should receive Form 1099-R by January 31 following the tax year showing all their distributions. See detailed instructions on how to enter Form 1099-R on your eFile.com tax return.
• If the custodian (otherwise known as a financial institution that is safekeeping securities for customers to minimize the risk of theft or loss) files with the IRS electronically, the form is due by March 31. The taxpayer, the IRS, the municipal or state tax department, etc., receive a copy of Form 1099-R. If you received an erroneous 1099-R form, you should immediately contact the plan custodian who sent it to rectify the situation and avoid filing an incorrect tax return.
• If you contribute money to your retirement account while you are working, you may receive Form 5498. This form is informational and does not get reported on your taxes.

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This page details and answers some common questions regarding Form 1099-R and your retirement accounts. Learn what types of transactions result in a 1099-R, what to do with your retirement income form, and which kinds of retirement income are taxable.

1099-R Retirement Accounts

If you either retired recently or just started taking distributions from a retirement account, you've added the 1099-R to your tax return plate. Thankfully, we can explain the general steps for completing that here. Note that the IRS taxes the types of retirement vehicles or accounts differently. Here is an overview that covers most options:

• Traditional 401(k)s and IRAs: Traditional 401(k)s and IRAs are the bread and butter of the average American’s nest egg, favored for their ability to reduce taxable income. Your 401(k) contributions are tax-deferred, meaning you’ll pay taxes on withdrawals once it’s matured. Contributions to traditional IRAs are tax-deductible and withdrawals are taxed as income.
• Roth IRA: Roth IRAs aren’t tax deductible, but once you’ve had the account for five years, withdrawals are tax-free.
• Social Security benefits: Depending on your provisional income, you may or may not have to pay taxes on Social Security benefits. Your provisional income is what determines whether or not your Social Security income is taxed. Review the current year tax brackets for income on the linked page to learn if your income may be taxed. In some cases, up to 50% of your benefits may be taxable; in others, up to 85% of your benefits are taxable.
  • To find your provisional income, take your modified adjusted gross income, add half of your Social Security benefits, and add your total tax-exempt interest.
  • If any of this is confusing or overwhelming, we get it. Simply prepare your return on eFile.com and you will see in real time what percentage, if any, of your Social Security income is taxable.
• Annuities: Distributions from annuities purchased with post-tax money will likely have a tax-free part. Generally, you can assume that some income from annuities is taxable when it comes to filing taxes.
• The CSA 1099R: Short for Civil Service Annuity, the Office of Personnel Management (OPM) uses the CSA to report a federal government retiree’s pension income. The OPM also uses this annuity to report a retiree’s spousal survivor benefit income. See a sample CSA, CSF 1099-R.
• Foreign retirement: Any taxes paid in a foreign country applies for a foreign tax credit. More details are below and on this foreign earned income page.

Retirement income and states: Some states have exclusions depending on the type of retirement plan and state. See which states tax what kinds of retirement income. When you retire, start planning your taxes with this free tax calculator to see what kinds of taxes you may face on your retirement income. You can also calculate state taxes here with these free tools.

Are Form 1099-R Distributions Taxable?

Generally, the entire 1099-R distribution is taxable income if the retirement contributions were made BEFORE TAX (e.g., traditional IRA) to the plan and/or pension plan(s).

• In cases where after-tax contributions were made to an annuity or pension, only a portion of the distribution may be taxed or none of it.
• Box 2 of Form 1099-R contains the amount of the distribution that is taxable - see Form 1099-R and 5498 instructions. 

When you enter Form 1099-R into your eFile account, you will see Boxes 1 and 2 reporting the total distribution and then the taxable amount. In most cases, these amounts are the same, but make sure you enter these into the tax software as they appear on your form.

AFTER-TAX retirement contributions are generally not taxable income. Examples include:

• A direct rollover (other than an in-plan Roth rollover, or IRR) from a qualified plan, a section 403(b) plan, or a governmental section 457(b) plan to another such plan or to a traditional IRA
• A direct rollover from a designated Roth account, such as a Roth 401(k), to a Roth IRA
• A traditional SEP or SIMPLE IRA directly transferred to an accepting employer plan
• An IRA re-characterization
• A nontaxable charge or payment for the purchase of a qualified long-term care insurance contract against the cash value of an annuity contract or the cash surrender value of a life insurance contract
• A nontaxable section 1035 exchange of life insurance, annuity, endowment, or long-term care insurance contracts.

See instructions on how to enter 1099-R distributions on your eFile.com tax return.

1099-R Income, Distribution Types

Who should receive a 1099-R? Retired people with an income or distributions that are taxable under this form should expect a 1099-R by January 31.

Profit-sharing is when your retirement package includes payouts based on the income of the company. This can often be seen in stock or options with an annual or even a quarterly payout. If you have a standard retirement plan at a set rate, that must also be filed on your 1099-R form.

Who Should Not Receive a 1099-R?

People who are actively employed and not retired from another job should not receive a Form 1099-R. If you have retired from one job and then sought employment elsewhere, you will receive a 1099-R from your former employer and will need to file the information on it with the IRS.

What Is the Minimum Amount Reported on a 1099-R? 

The minimum amount of money from distributions that make you legally liable to file a 1099-R is $10. That feels like a small amount, but the IRS is strict with this minimum.

If you are expecting a 1099 form and you do not receive it by January 31, the IRS recommends contacting them at 1-800-829-1040. The information from a 1099-R can be e-filed easily, but it can take time to prepare. For this reason, ensure you do not put it off until the last minute. Contact the IRS or get in touch with the issuer of the form.

How File a Tax Return with Form 1099R Income

See detailed instructions on how to enter Form 1099-R on your eFile.com tax return. Here are some simple details to better understand your 1099-R:

• On the form, the top left box is for listing your former Employer’s name and address.
• Directly below are boxes for your Employer’s Tax Identification number and yours. You are the recipient.
• The large box below provides space for your personal information. This is where you need to put your full legal name, address, state, and zip code on the lines provided. If you live outside of the United States, then you need to include the province or state, country, and foreign zip code.
• In your eFile account, you can enter the amounts from the boxes into the corresponding entries within the tax app - see a breakdown of each box below.

Box Numbers on Form 1099-R

• Box 1. Gross distribution from the plan: The total amount of the distribution before income tax or other deductions were withheld. Includes direct rollovers, IRA direct payments to accepting employer plans, re-characterized IRA contributions, Roth IRA conversions, and premiums paid by a trustee or custodian for the cost of current life or other insurance protection. Also, include in this box distributions to plan participants from governmental section 457(b) plans. However, in the case of a distribution by a trust representing certificates of deposit (CDs) redeemed early, report the net amount distributed. Accelerated death benefits are not on Form 1099-R; they should be reported on Form 1099-LTC, Long-Term Care, and Accelerated Death Benefits.
• Box 2a. The taxable portion of the distribution (if known by the payer) - the taxable amount is in box 2a. However, this box might be blank if the data to compute the taxable amount is not available.
• Box 2b. Checkboxes indicating whether or not the payer has calculated the taxable portion of the distribution and whether it was a total or partial distribution of the plan balance. An “X” in this box indicates if the payment shown in box 1 is a total distribution. Total distribution is one or more distributions within one tax year in which the account's entire balance is distributed. If periodic or installment payments are made, mark this box in the year the final payment is made.
• Box 3. The portion of the distribution allocated to capital gains -If any amount is taxable as a capital gain, report it in box 3
• Box 4. Federal income tax withheld from the distribution (if any).
• Box 5. The portion of the distribution allocated to employee contributions, designated Roth contributions, or insurance premiums. Employee contributions, designated Roth contributions, or insurance premiums that the employee may recover tax-free this year (even if they exceed the box 1 amount).
• Box 6. Net unrealized appreciation in employer’s securities. For distribution from a qualified plan (except a qualified distribution from a designated Roth account) includes securities of the employer corporation (or a subsidiary or parent corporation), and you can compute the NUA in the employer's securities.
• Box 7. Detailed overview of Form 1099-R distribution codes. These distribution codes are designed to specify the type of distribution received. An “X” in the IRA/SEP/SIMPLE checkbox if the distribution is from a traditional IRA, SEP IRA, or SIMPLE IRA. Should not be checked for a distribution from a Roth IRA or for an IRA re-characterization.
• Box 8. Other. Shows the value of any annuity contract that was part of the distribution. This amount is not taxable when it is received and is not included in boxes 1 or 2a.
• Box 9a. Your percentage of total distribution. If this is a total distribution and it is made to more than one person, the percentage received by the person whose name appears on Form 1099-R.
• Box 9b. Total employee contributions.  If the total employee contributions or designated Roth contributions are reported, any amounts recovered tax-free in prior years should not be included. For a total distribution, the total employee contributions or designated Roth contributions are reported in box 5 rather than in box 9b.
• Box 10. Amount allocable to IRR within five years. The amount of the distribution allocable to an IRR made within the 5-year period begins with the first day of the year the rollover was made. The box is blank if an exception under section 72(t) applies.
• Box 11. First year of designated Roth contributions.  First year of the 5-tax-year period. This is the year in which the designated Roth account was first established by the recipient.
• Box 12. FATCA filing requirement checkbox. Box is checked if an FFI reporting a cash value insurance contract or annuity contract that is a U.S. account in a manner similar to that required under section 6047(d).
• Box 13. Date of payment. Date payment was made for reportable death benefits under section 6050Y.
• Box 14 through Box 19. These boxes and copies 1 and 2 are provided for your convenience and need not be completed for the IRS.

Account Number: Bottom left of Form 1099-R. The account number is required if you have multiple accounts for a recipient for whom you are filing more than one Form 1099-R.

IRS Bank Surveillance

The IRS has recently announced plans to begin checking banking information for transactions they determine should be taxable. The good news is that it's unclear whether this program has been launched, so this shouldn't be a concern around tax time.

Foreign retirement

If you retire abroad, you may be required to pay taxes to your country of residence. This may or may not include retirement income. Just for reference for those curious, the top nine countries where you pay no income tax on foreign retirement income are: 

• Panama
• Costa Rica
• Portugal
• Ecuador
• Greece
• Belize
• Nicaragua
• The Philippines
• Malta

If you choose a different country, know that you may be taxed in that country even on your pension and may then have to file foreign tax exclusions with the IRS to avoid being double taxed. 

Once you retire abroad, you’ll still have the same fundamental U.S. retirement tax implications as you would if you’d retired stateside. Leaving the U.S. makes it a bit more complicated, but the cost of living can often offset that burden.

Distributions from your 401(k) and pensions are still taxed as income, albeit they’re treated as unearned income—meaning you won’t be able to claim them under the Foreign Earned Income Exclusion. If you want to transfer your 401(k) to an overseas plan, we recommend considering all the implications first. Transferring funds from a qualified plan won’t be tax-free and won’t count as a rollover. In the end, you may end up owing taxes on the transfers, getting hit with an early withdrawal penalty, and unintentionally walking away with a foreign mutual fund (PFIC) you now have to report.

If you have a foreign pension, it will most likely not qualify for the same retirement vehicle tax benefits as a U.S.-based 401(k) or IRA. Your contributions aren’t typically tax-deductible on your U.S. income taxes, and you may be taxed on the plan’s annual growth regardless of whether you’re taking distributions. Additionally, employer contributions for foreign pension plans may also be considered taxable in contribution years.

The U.S. has tax treaties with specific countries with special rules on foreign pension taxes.

List of U.S. tax treaties with other countries

• Foreign Tax Treaties
• Information on US Canada Tax Treaty
• United States - Canada Income Tax Convention

What else should you know about taxes when retiring overseas? 

One major thing expat retirees forget about is that if you receive income from a foreign retirement plan and pay foreign tax on that income, you may be eligible for U.S. tax credits. For example, the Foreign Tax Credit lets you claim those taxes paid dollar-for-dollar on your U.S. tax filing.

If you have a foreign spouse, are they eligible for spousal and survivor Social Security benefits?

You’ll be happy to know that there are ways a foreign spouse may qualify to receive Social Security benefits. One way is if their country of residence has a tax treaty or bilateral social security agreement. Because the rules change from country to country, you should check the rules pertaining to your resident country.

Commonly Made 1099-R Mistakes

Some self-filing taxpayers forget to report their full taxable amount in box 2a on Form 1099-R on their tax return. If this is you, then it means you're likely underreporting your taxable income and possibly underpaying how much you might owe to the IRS, putting yourself at risk of having to pay a penalty.

You Might Not Need to Report the Gross Distribution Amount that was Used on Your 1040

Some taxpayers mistakenly report the gross distribution rather than the taxable amount on their 1099-R. The gross distribution amount that's reported on Form 1099-R might not be taxable. Since the 1099-R only counts retirement distributions or the other distributions listed above, it does not include certain kinds of income, and there are exclusions.

Rollovers are not Taxable

Did you move funds from one retirement account into another - your 401(k) or 403(b) to another retirement account? If so, you'll get a Form 1099-R.

Now you might be inclined to report the amount of the rollover - the gross distribution -- as taxable income. Don't. None of it is taxable because it all went to the account. If you remove funds from the account to spend, that amount is taxable as a distribution.

Did you take a qualified charitable distribution?

Generally, a qualified charitable distribution is a taxable distribution from an account owned by an individual who is age 70½ or over that is paid directly from them to a qualified charity. Not surprisingly, taxpayers are prone to making costly mistakes when taking a qualified charitable distribution.

Charitable distributions are reported on the Form 1099-R. Your custodian will report the full amount. It is your responsibility to you to then keep track of the portion that is not taxable. Attention: Make sure to separate out the non-taxable and taxable portions of the distribution.

To report a QCD on your Form 1040 tax return, the IRS recommends that you generally report the full amount of the charitable distribution on the line for distributions. Then, on the line for the taxable amount, enter zero if the full amount was a qualified charitable distribution. Enter "QCD" next to this line. Note: If you itemize your deductions, you cannot then claim the amount of the QCD as a deduction. This is because your charitable distribution has already been excluded from your taxable income.

Since the QCD is excluded from your taxable income, it could reduce how much of your Social Security income is taxed as well as reduce how much extra you might pay for Medicare Part B and Part D premiums. (High-income Medicare beneficiaries are subject to paying an income-related monthly adjustment on their Part B and Part D premiums.

Distributions from nondeductible IRAs

Did you make non-deductible contributions to an IRA, and now you are taking distributions from it? Good news, if so. The distribution isn’t all taxable; just the amount in excess of your basis is taxable income. The bad news? Your Form 1099-R isn’t going to tell you what portion of that distribution isn’t taxable, and if you report the gross distribution, you’ll likely be paying more tax than the law demands.

How might you know the amount that’s in excess of your basis? Hopefully, you filed Form 8606 with the IRS and kept a copy close at hand where you can find it. Form 8606 keeps track of your basis on nondeductible contributions.

The potential for a similar mistake arises when doing a Roth conversion when you own traditional IRAs and nondeductible IRAs. Part of the taxable amount is based on the nondeductible and therefore is not taxable.

To determine how much is taxable, you’ll have to become familiar with the aggregation rule. Under that rule, the taxable amount is prorated: it’s based on the basis of the deductible and any other balances. Read how to use Nondeductible IRA Contributions to Get Money into a Roth IRA.

Did you take a coronavirus-related distribution?

Under the CARES Act, qualified individuals could take up to $100,000 of coronavirus-related distributions from eligible retirement plans (certain employer retirement plans, such as section 401(k) and 403(b) plans, and IRAs) and receive favorable tax treatment.

Now you can repay part or all the coronavirus-related distribution to an eligible retirement plan, but only if you complete the repayment within three years after the date the distribution was received, according to the IRS.

As for paying taxes, you get to include the amount in income over three years, starting with 2020 or include the entire amount in income for 2020. And if you repay a coronavirus-related distribution, the IRS says the distribution will be treated as though it were repaid in a direct trustee-to-trustee transfer so that you do not owe federal income tax on the distribution.

RMDs waived in 2020

If you are filing back taxes, there is one other valuable piece of information to know.

The CARES Act waived the required minimum distributions for 2020. But if you took an RMD in 2020 from certain retirement accounts, you had the opportunity, up until Aug. 31, to roll those funds back into a retirement account.

And if you took an RMD in 2020, you’re going to get a Form 1099-R. If you don’t roll the funds back, you’ll likely have to pay taxes on the taxable amount.

However, if you did roll the funds back, you won’t owe taxes on the taxable amount. 

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