Publication 575 - Pension And Annuity Income - 2004 Page 31
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36qualified annuity plan must be considered individually in
If the retiree was reporting the annuity under the Gen-
satisfying its distribution requirements. However, if you
eral Rule, you must apply the same exclusion percentage
have more than one tax-sheltered annuity account, you
to your initial survivor annuity payment called for in the
can total the required distributions and then satisfy the
contract. The resulting tax-free amount will then remain
requirement by taking distributions from any one (or more)
fixed for the initial and future payments. Increases in the
of the tax-sheltered annuities.
survivor annuity are fully taxable. See Publication 939 for
more information on the General Rule.
If the retiree was reporting the annuity under the Simpli-
Survivors and
fied Method, the part of each payment that is tax free is the
same as the tax-free amount figured by the retiree at the
Beneficiaries
annuity starting date. See Simplified Method under Taxa-
tion of Periodic Payments, earlier.
Generally, a survivor or beneficiary reports pension or
Guaranteed payments. If you receive guaranteed pay-
annuity income in the same way the plan participant would
ments as the decedent’s beneficiary under a life annuity
have reported it. However, some special rules apply, and
contract, do not include any amount in your gross income
they are covered elsewhere in this publication as well as in
until your distributions plus the tax-free distributions re-
this section.
ceived by the life annuitant equal the cost of the contract.
All later distributions are fully taxable. This rule does not
Estate tax deduction. You may be entitled to a deduction
apply if it is possible for you to collect more than the
for estate tax if you receive a joint and survivor annuity that
guaranteed amount. For example, it does not apply to
was included in the decedent’s estate. You can deduct the
payments under a joint and survivor annuity.
part of the total estate tax that was based on the annuity,
provided that the decedent died after his or her annuity
starting date. (For details, see section 1.691(d) –1 of the
How to Get Tax Help
regulations.) Deduct it in equal amounts over your remain-
ing life expectancy.
You can take the estate tax deduction as an itemized
You can get help with unresolved tax issues, order free
deduction on Schedule A, Form 1040. This deduction is
publications and forms, ask tax questions, and get more
not subject to the 2%-of-adjusted-gross-income limit on
information from the IRS in several ways. By selecting the
miscellaneous deductions.
method that is best for you, you will have quick and easy
access to tax help.
Survivors of employees. Distributions the beneficiary of
a deceased employee gets may be accrued salary pay-
Contacting your Taxpayer Advocate. If you have at-
ments, distributions from employee profit-sharing, pen-
tempted to deal with an IRS problem unsuccessfully, you
sion, annuity, or stock bonus plans, or other items. Some
should contact your Taxpayer Advocate.
of these should be treated separately for tax purposes. The
The Taxpayer Advocate independently represents your
treatment of these distributions depends on what they
interests and concerns within the IRS by protecting your
represent.
rights and resolving problems that have not been fixed
Salary or wages paid after the death of the employee
through normal channels. While Taxpayer Advocates can-
are usually the beneficiary’s ordinary income. If you are a
not change the tax law or make a technical tax decision,
beneficiary of an employee who was covered by any of the
they can clear up problems that resulted from previous
retirement plans mentioned, you can exclude from income
contacts and ensure that your case is given a complete
nonperiodic distributions received that totally relieve the
and impartial review.
payer from the obligation to pay an annuity. The amount
To contact your Taxpayer Advocate:
that you can exclude is equal to the deceased employee’s
•
investment in the contract (cost).
Call the Taxpayer Advocate toll free at
If you are entitled to receive a survivor annuity on the
1-877-777-4778.
death of an employee, you can exclude part of each annu-
•
Call, write, or fax the Taxpayer Advocate office in
ity payment as a tax-free recovery of the employee’s in-
your area.
vestment in the contract. You must figure the tax-free part
•
of each payment using the method that applies as if you
Call 1-800-829-4059 if you are a TTY/TDD user.
were the employee. For more information, see Taxation of
•
Visit
Periodic Payments, earlier.
Survivors of retirees. Benefits paid to you as a survivor
For more information, see Publication 1546, The Tax-
payer Advocate Service of the IRS — How To Get Help
under a joint and survivor annuity must be included in your
With Unresolved Tax Problems.
gross income. Include them in income in the same way the
retiree would have included them in gross income. See
Free tax services. To find out what services are avail-
Partly Taxable Payments under Taxation of Periodic Pay-
ments, earlier.
able, get Publication 910, IRS Guide to Free Tax Services.
It contains a list of free tax publications and an index of tax
If the retiree reported the annuity under the Three-Year
Rule, your survivor payments are fully taxable.
topics. It also describes other free tax information services,
Page 31
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