Tax Resources

Understanding Form 1099-R

What is the tax Form 1099-R and what is it used for?

The IRS tax form 1099-R is used to report distributions from:

  • pensions
  • annuities
  • retirement plans and IRAs
What are pensions and annuities?

Pensions and annuities provide payments to the taxpayer after he or she retires. Pensions and annuities may be either partially taxable or fully taxable. The amount of taxable pensions or annuities depends on the amount of contribution to the plan.

Are pensions and annuities taxable?

In general, the amount of pensions and annuities received each year is fully taxable if:

  • the taxpayer did not pay any part of the cost of an employee pension or annuity and
  • the employer did not withhold part of the cost from the taxpayer's pay,

If the taxpayer paid part of the cost of the annuity, then the part of the annuity that represents a return of cost is not taxed. The taxable amount is often shown in box 2a of the Form 1099-R.

When are pensions considered wages?

If the taxpayer retired on disability then the amount reported on the IRS tax form 1099-R with a code 3 in box 7 is considered wages if the taxpayer has not reached the employer's minimum retirement age.

Understanding Form 1099-R

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