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Subject Author Date
Taxable part of pension, simplified method MyVeryOwnSelf 02-18-2007
Posted by MyVeryOwnSelf on February 18, 2007, 9:51 pm
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 IRS Publication 575 has a worksheet to calculate the taxable
portion of qualified employee pension income. My question is
about line 2 ("cost in the plan") in the case when TP's
contributions were partly pre-tax and partly after-tax.

What goes in line 2 in the following case, and why? --

Form 1099-R for 2006 has
70 in box 5 ("Nontaxable contributions")
3,500 in box 9b ("Total Employee Contributions").

An earlier letter from the plan says:
18,000 Tax-deferred contributions
12,000 Interest on tax-deferred contributions
3,600 Taxed contributions
7,500 Interest on taxed contributions

Thanks.

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Posted by Mark Bole on February 19, 2007, 2:20 pm
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 MyVeryOwnSelf wrote:

> IRS Publication 575 has a worksheet to calculate the taxable
> portion of qualified employee pension income. My question is
> about line 2 ("cost in the plan") in the case when TP's
> contributions were partly pre-tax and partly after-tax.
>
> What goes in line 2 in the following case, and why? --
>
> Form 1099-R for 2006 has
> 70 in box 5 ("Nontaxable contributions")
> 3,500 in box 9b ("Total Employee Contributions").
>
> An earlier letter from the plan says:
> 18,000 Tax-deferred contributions
> 12,000 Interest on tax-deferred contributions
> 3,600 Taxed contributions
> 7,500 Interest on taxed contributions

Did the payer include entries in boxes 2a and 2b? Why is
there a discrepancy between $3,500 in box 9b and the letter
which states $3,600 after-tax contributions?

-Mark Bole

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by MyVeryOwnSelf on February 19, 2007, 8:46 pm
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>> IRS Publication 575 has a worksheet to calculate the taxable
>> portion of qualified employee pension income. My question is
>> about line 2 ("cost in the plan") in the case when TP's
>> contributions were partly pre-tax and partly after-tax.
>> ...

> Did the payer include entries in boxes 2a and 2b?

Yes for 2a. No for 2b.

> Why is there a discrepancy between $3,500 in box 9b and
> the letter which states $3,600 after-tax contributions?

Don't really know, but if they're supposed to be the same
I'll go with the most recent communication, the 1099-R form.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by A.G. Kalman on February 19, 2007, 2:20 pm
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MyVeryOwnSelf wrote:

> IRS Publication 575 has a worksheet to calculate the taxable
> portion of qualified employee pension income. My question is
> about line 2 ("cost in the plan") in the case when TP's
> contributions were partly pre-tax and partly after-tax.
>
> What goes in line 2 in the following case, and why? --
>
> Form 1099-R for 2006 has
> 70 in box 5 ("Nontaxable contributions")
> 3,500 in box 9b ("Total Employee Contributions").
>
> An earlier letter from the plan says:
> 18,000 Tax-deferred contributions
> 12,000 Interest on tax-deferred contributions
> 3,600 Taxed contributions
> 7,500 Interest on taxed contributions

Box 9b reflects your employee after-tax contributions that
were not recovered in any prior years. The simplified
method requires that you use the cost basis at the start of
the annuity. This would be the $3600 that was reported to
you in the letter.

--
Alan
http://taxtopics.net

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by MyVeryOwnSelf on February 19, 2007, 8:46 pm
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>> IRS Publication 575 has a worksheet to calculate the taxable
>> portion of qualified employee pension income. My question is
>> about line 2 ("cost in the plan") in the case when TP's
>> contributions were partly pre-tax and partly after-tax.
>> ...

> Box 9b reflects your employee after-tax contributions that
> were not recovered in any prior years. The simplified
> method requires that you use the cost basis at the start of
> the annuity. This would be the $3600 that was reported to
> you in the letter.

If it matters, 2006 was the first year receiving benefits,
and they started in mid-year.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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