Publication 575 - Pension And Annuity Income - 2004 Page 4
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36last known mailing address of the participant and each
For more information on the tax treatment of withdraw-
alternate payee, and the amount or percentage of the
als, see Taxation of Nonperiodic Payments, later. If you
participant’s benefits to be paid to each alternate payee. A
withdraw funds from your annuity before you reach age
QDRO may not award an amount or form of benefit that is
59
1
/
, also see Tax on Early Distributions under Special
2
not available under the plan.
Additional Taxes, later.
A spouse or former spouse who receives part of the
Annuity payments. If you receive annuity payments
benefits from a retirement plan under a QDRO reports the
under a variable annuity plan or contract, you recover your
payments received as if he or she were a plan participant.
cost tax free under either the Simplified Method or the
The spouse or former spouse is allocated a share of the
General Rule, as explained under Taxation of Periodic
participant’s cost (investment in the contract) equal to the
Payments, later. For a variable annuity paid under a quali-
cost times a fraction. The numerator of the fraction is the
fied plan, you generally must use the Simplified Method.
present value of the benefits payable to the spouse or
For a variable annuity paid under a nonqualified plan
former spouse. The denominator is the present value of all
(including a contract you bought directly from the issuer),
benefits payable to the participant.
you must use a special computation under the General
A distribution that is paid to a child or other dependent
Rule. For more information, see Variable annuities in Pub-
under a QDRO is taxed to the plan participant.
lication 939 under Computation Under the General Rule.
Variable Annuities
Death benefits. If you receive a single-sum distribution
from a variable annuity contract because of the death of
The tax rules in this publication apply both to annuities that
the owner or annuitant, the distribution is generally taxable
provide fixed payments and to annuities that provide pay-
only to the extent it is more than the unrecovered cost of
ments that vary in amount based on investment results or
the contract. If you choose to receive an annuity, the
other factors. For example, they apply to commercial varia-
payments are subject to tax as described above. If the
ble annuity contracts, whether bought by an employee
contract provides a joint and survivor annuity and the
retirement plan for its participants or bought directly from
primary annuitant had received annuity payments before
the issuer by an individual investor. Under these contracts,
death, you figure the tax-free part of annuity payments you
the owner can generally allocate the purchase payments
receive as the survivor in the same way the primary annui-
among several types of investment portfolios or mutual
tant did. See Survivors and Beneficiaries, later.
funds and the contract value is determined by the perform-
ance of those investments. The earnings are not taxed
Section 457 Deferred
until distributed either in a withdrawal or in annuity pay-
Compensation Plans
ments. The taxable part of a distribution is treated as
ordinary income.
If you work for a state or local government or for a tax-ex-
For information on the tax treatment of a transfer or
empt organization, you may be able to participate in a
exchange of a variable annuity contract, see Transfers of
section 457 deferred compensation plan. If your plan is an
Annuity Contracts under Taxation of Nonperiodic Pay-
eligible plan, you are not taxed currently on pay that is
ments, later.
deferred under the plan or on any earnings from the plan’s
investment of the deferred pay. You are taxed on amounts
Withdrawals. If you withdraw funds before your annuity
deferred in an eligible state or local government plan only
starting date and your annuity is under a qualified retire-
when they are distributed from the plan. You are taxed on
ment plan, a ratable part of the amount withdrawn is tax
amounts deferred in an eligible tax-exempt organization
free. The tax-free part is based on the ratio of your cost
plan when they are distributed or otherwise made available
(investment in the contract) to your account balance under
to you.
the plan.
This publication covers the tax treatment of benefits
If your annuity is under a nonqualified plan (including a
under eligible section 457 plans, but it does not cover the
contract you bought directly from the issuer), the amount
treatment of deferrals. For information on deferrals under
withdrawn is allocated first to earnings (the taxable part)
section 457 plans, see Retirement Plan Contributions
and then to your cost (the tax-free part). However, if you
under Employee Compensation in Publication 525.
bought your annuity contract before August 14, 1982, a
different allocation applies to the investment before that
Is your plan eligible? To find out if your plan is an eligible
date and the earnings on that investment. To the extent the
plan, check with your employer. The following plans are
amount withdrawn does not exceed that investment and
not eligible section 457 plans.
earnings, it is allocated first to your cost (the tax-free part)
•
and then to earnings (the taxable part).
Bona fide vacation leave, sick leave, compensatory
If you withdraw funds (other than as an annuity) on or
time, severance pay, disability pay, or death benefit
after your annuity starting date, the entire amount with-
plans.
drawn is generally taxable.
•
Nonelective deferred compensation plans for non-
The amount you receive in a full surrender of your
employees (independent contractors).
annuity contract at any time is tax free to the extent of any
•
cost that you have not previously recovered tax free. The
Deferred compensation plans maintained by
rest is taxable.
churches.
Page 4
ADVERTISEMENT
0 votes
Related Articles
Related forms
Form Nj-500-m - Return Of Gross Tax Withheld Form Salaries And Wages, Pension And Annuity Income And Gambling Winnings - 1996
Financial
Worksheet Iii And Iv- Qualified Capital Gain Exclusion And Partial Pension And Annuity Income Exemption
Financial
Form Nj-w4-p - Certificate Of Voluntary Withholding Of New Jersey Gross Income Tax From Pension And Annuity Payments - 1996
Financial
Form Nj-w-4p - Certificate Of Voluntary Withholding Of New Jersey Gross Income Tax From Pension And Annuity Payments
Financial
Form Nj-w-4p - Certificate Of Voluntary Withholding Of New Jersey Gross Income Tax From Pension And Annuity Payments
Financial
Related Categories
Parent category: Financial