If Form 1099-R does not show the taxable amount in Box 2a, you may need to use the General Rule explained in Publication 575 and Publication 939 to figure the taxable portion to enter on the tax return. If the annuity starting date was after July 1, 1986, the taxpayer may be required to figure the taxable part of their distribution using the Simplified Method.
Note: If Form 1099-R does show a taxable amount, the taxpayer may be able to report a lower taxable amount by using the Simplified Method.
For the purpose of calculating the taxable amount of the distribution reported on Form 1099-R, you'll need to know the plan's annuity starting date. The annuity starting date is the later of
- the first day of the first period for which the taxpayer received a payment.
- the date that the plan's obligations became fixed.
The taxpayer must use the Simplified Method if either of these is true:
- their annuity starting date was after July 1, 1986, and on or before November 18, 1996, and the Simplified Method was used last year to figure the taxable portion;
- their annuity starting date was after November 18, 1996, and BOTH of the following apply:
- They received pension or annuity payments from any of the following plans:
- A qualified employee plan, or
- A qualified employee annuity, or
- A tax-sheltered annuity plan (403(b) plan)
- On their annuity starting date, at least one of the following is true:
- They were under age 75, or
- They were entitled to less than 5 years of guaranteed payments
The taxpayer cannot use the Simplified Method if
- the pension or annuity is a nonqualified plan, or
- they do not meet the conditions described above.
To access the Simplified General Rule Worksheet, from the Main Menu of the tax return (Form 1040) select:
- Income
- IRA/Pension Distributions - Select New and enter the Payer Information along with the Gross Distribution in Box 1.
- Check the box labeled SGR located to the right of Line 2a. Taxable Amount.
- You will be asked if you would like to use the Simplified General Rule Worksheet. Select YES
- Enter the information relating to the annuity into the worksheet. Some of the information will flow in from the Form 1099-R, but the taxpayer will need to provide the other information needed.
After completing the worksheet, the calculated taxable amount will carry back to box 2a of the 1099-R entry window.
Note: This is a brief guide on entering information into the Simplified General Rule Worksheet into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information:
IRS: Publication 575, Pension and Annuity Income
