Federal Tax Guide for Seniors
Extracted from PDF file 2018-federal-publication-554.pdf, last modified January 2019
Tax Guide for SeniorsDepartment of the Treasury Internal Revenue Service Publication 554 Contents What's New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Cat. No. 15102R Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Tax Guide for Seniors Chapter 1. 2018 Filing Requirements . . . . . . . . . . 4 General Requirements . . . . . . . . . . . . . . . . . . . . 4 For use in preparing 2018 Returns Chapter 2. Taxable and Nontaxable Income Compensation for Services . . . . . . . . . . . . Retirement Plan Distributions . . . . . . . . . . . Social Security and Equivalent Railroad Retirement Benefits . . . . . . . . . . . . . . . Sickness and Injury Benefits . . . . . . . . . . . Life Insurance Proceeds . . . . . . . . . . . . . . Sale of Home . . . . . . . . . . . . . . . . . . . . . . Reverse Mortgages . . . . . . . . . . . . . . . . . Other Items . . . . . . . . . . . . . . . . . . . . . . . ..... 5 ..... 5 ..... 6 . . . . . . . . . . . . . . . . . . . . . . . . 12 14 15 17 18 18 Chapter 3. Adjustments to Income . . . . . . . . . . . 19 Individual Retirement Arrangement (IRA) Contributions and Deductions . . . . . . . . . . . . 20 Chapter 4. Deductions . . . . . . . . . . . . . . . . . . . . 20 Standard Deduction . . . . . . . . . . . . . . . . . . . . . 20 Itemized Deductions . . . . . . . . . . . . . . . . . . . . . 21 Chapter 5. Credits . . . . . . . . . . . . . . Credit for the Elderly or the Disabled Child and Dependent Care Credit . Earned Income Credit (EIC) . . . . . . .. . .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 26 29 29 Chapter 6. Estimated Tax . . . . . . . . . . . . . . . . . . 31 Who Must Make Estimated Tax Payments . . . . . 31 Chapter 7. How To Get Tax Help . . . . . . . . . . . . . 31 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Future Developments For the latest information about developments related to Pub. 554, such as legislation enacted after it was published, go to IRS.gov/Pub554. What's New Standard deduction amount increased. For 2018, the standard deduction amount has been increased for all filers. The amounts are: • Single or Married filing separately — $12,000. • Married filing jointly or Qualifying widow(er) — Get forms and other information faster and easier at: • IRS.gov (English) • IRS.gov/Spanish (Español) • IRS.gov/Chinese (中文) Jan 08, 2019 • IRS.gov/Korean (한국어) • IRS.gov/Russian (Pусский) • IRS.gov/Vietnamese (TiếngViệt) $24,000. • Head of household — $18,000. Personal exemptions suspended. For 2018, you can’t claim a personal exemption deduction for yourself, your spouse, or your dependents. Alternative minimum tax exemption increased. The AMT exemption amount has increased to $70,300 ($109,400 if married filing jointly or qualifying widow(er); $54,700 if married filing separately). Earned income credit. The maximum amount of income you can earn and still get the credit has increased. You may be able to take the credit if you earn less than: • $15,270 ($20,950 if married filing jointly), don't have a qualifying child, and are at least 25 years old and under 65; • $40,320 ($46,010 if married filing jointly), and you have one qualifying child; • $45,802 ($51,492 if married filing jointly), and you have two qualifying children; or • $49,194 ($54,884 if married filing jointly), and you have three or more qualifying children. For more information, see Earned Income Credit, later. Changes to itemized deductions. For 2018 there have been changes to itemized deductions that can be claimed on Schedule A. These include the following. • Your itemized deductions are no longer limited if your adjusted gross income is over a certain limit. • You can no longer deduct more than $10,000 ($5,000 if married filing separately) of state and local taxes, including income (or sales), real estate, and personal property taxes. • You can no longer deduct home mortgage interest to the extent your loan wasn’t used to buy, build, or improve your home. • You can no longer deduct job-related expenses or other miscellaneous itemized deductions that were subject to the 2% of adjusted gross income floor. See the Schedule A instructions for more information on these changes and a complete list of changes. Form 1040A and 1040-EZ no longer available. Forms 1040A and 1040-EZ aren’t available to file your 2018 taxes. If you used one of these forms in the past, you will now file Form 1040. Some forms and publications that were released in 2017 and early 2018 (for example, Form W-2) may still have references to Form 1040A or Form 1040-EZ. Please disregard these references. Reminders Tax return preparers. Choose your preparer carefully. If you pay someone to prepare your return, the preparer is required, under the law, to sign the return and fill in the other blanks in the Paid Preparer's area of your return. Remember, however, that you are still responsible for the accuracy of every item entered on your return. If there is any underpayment, you are responsible for paying it, plus any interest and penalty that may be due. Page 2 Third party designee. You can check the “Yes” box in the Third Party Designee area of your return to authorize the IRS to discuss your return with your preparer, a friend, a family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. It also allows your designee to perform certain actions. See your income tax return instructions for details. Employment tax withholding. Your wages are subject to withholding for income tax, social security tax, and Medicare tax even if you are receiving social security benefits. Social security benefits information. Social security beneficiaries may quickly and easily obtain various information from SSA’s website with a my Social Security account, including getting a replacement SSA-1099 or SSA1042S. For more information, go to SSA.gov/myaccount. See Obtaining social security information, later. Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Introduction The purpose of this publication is to provide a general overview of selected topics that are of interest to older taxpayers. The publication will help you determine if you need to file a return and, if so, what items to report on your return. Each topic is discussed only briefly, so you will find references to other free IRS publications that provide more detail on these topics if you need it. Table I has a list of questions you may have about filing your federal tax return. To the right of each question is the location of the answer in this publication. Also, at the back of this publication there is an index to help you search for the topic you need. While most federal income tax laws apply equally to all taxpayers, regardless of age, there are some provisions that give special treatment to older taxpayers. The following are some examples. • Higher gross income threshold for filing. You must be age 65 or older at the end of the year to get this benefit. You are considered age 65 on the day before your 65th birthday. Therefore, you are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. • Higher standard deduction. If you don't itemize de- ductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. You are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. Publication 554 (2018) Table I. What You Should Know About Federal Taxes Note. The following is a list of questions you may have about filling out your federal income tax return. To the right of each question is the location of the answer in this publication. What I Should Know Where To Find the Answer Do I need to file a return? See chapter 1. Is my income taxable or nontaxable? If it is nontaxable, must I still report it? How do I report benefits I received from the Social Security Administration or the Railroad Retirement Board? Are these benefits taxable? Must I report the sale of my home? If I had a gain, is any part of it taxable? See chapter 2. See Social Security and Equivalent Railroad Retirement Benefits in chapter 2. See Sale of Home in chapter 2. What are some of the items that I can deduct to reduce my income? See chapters 3 and 4. How do I report the amounts I set aside for my IRA? See Individual Retirement Arrangement Contributions and Deductions in chapter 3. Would it be better for me to claim the standard deduction or itemize my deductions? See chapter 4. What are some of the credits I can claim to reduce my tax? See chapter 5 for discussions on the credit for the elderly or the disabled, the child and dependent care credit, and the earned income credit. Must I make estimated tax payments? See chapter 6. How do I contact the IRS or get more information? See chapter 7. • Credit for the elderly or the disabled. If you qualify, Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions. You can send us comments through IRS.gov/ FormComments. Or you can write to: you may benefit from the credit for the elderly or the disabled. To determine if you qualify and how to figure this credit, see Credit for the Elderly or the Disabled, later. Return preparation assistance. The IRS wants to make it easier for you to file your federal tax return. You may find it helpful to visit a Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), or American Association of Retired Persons (AARP) Tax-Aide site near you. Volunteer Income Tax Assistance and Tax Counseling for the Elderly. These programs provide free help for low-income taxpayers and taxpayers age 60 or older to fill in and file their returns. For the VITA/TCE site nearest you, contact your local IRS office. For more information, see Preparing and filing your tax return under How To Get Tax Help. AARP Tax-Aide. AARP Foundation Tax-Aide offers free tax preparation and has more than 5,000 locations in neighborhood libraries, malls, banks, community centers, and senior centers annually during the filing season. Visit AARP.org/TaxAide or call 888-OUR-AARP (888-687-2277) for more information. Publication 554 (2018) Internal Revenue Service Tax Forms and Publications 1111 Constitution Ave. NW, IR-6526 Washington, DC 20224 Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions and publications. Ordering forms and publications. Visit IRS.gov/ FormsPubs to download forms and publications. Otherwise, you can go to IRS.gov/OrderForms to order current and prior-year forms and instructions. Your order should arrive within 10 business days. Tax questions. If you have a tax question not answered by this publication, check IRS.gov and How To Get Tax Help at the end of this publication. Page 3 1. 2018 Filing Requirements If income tax was withheld from your pay, or if you qualify for a refundable credit (such as the earned income credit, the additional child tax credit, or the American opportunity credit), you should file a return to get a refund even if you aren't otherwise required to file a return. Don't file a federal income tax return if you don't TIP meet the filing requirements and aren't due a re- fund. If you need assistance to determine if you need to file a federal income tax return for 2018, go to IRS.gov/ITA and use the Interactive Tax Assistant (ITA). General Requirements If you are a U.S. citizen or resident alien, you must file a return if your gross income for the year was at least the amount shown on the appropriate line in Table 1-1. For other filing requirements, see your tax return instructions or Pub. 501, Dependents, Standard Deduction, and Filing Information. If you were a nonresident alien at any time during the year, the filing requirements that apply to you may be different from those that apply to U.S. citizens. See Pub. 519, U.S. Tax Guide for Aliens. Gross income. Gross income is all income you receive in the form of money, goods, property, and services that isn't exempt from tax. If you are married and live with your spouse in a community property state, half of any income defined by state law as community income may be considered yours. States with community property laws include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A registered domestic partner in Nevada, Washington, or California generally must report half the combined community income of the individual and his or her domestic partner. For more information about community property, see Pub. 555, Community Property. For more information on what to include in gross income, see chapter 2. Table 1-1. 2018 Filing Requirements Chart for Most Taxpayers Note. You must file a return if your gross income was at least the amount shown in the last column. AND at the end of 2018 you were*. . . THEN file a return if your gross income** was at least. . . Single under 65 $12,000 65 or older $13,600 under 65 $18,000 65 or older $19,600 under 65 (both spouses) $24,000 65 or older (one spouse) $25,300 65 or older (both spouses) $26,600 . IF your filing status is. . . Head of household Married filing jointly*** Married filing separately any age Qualifying widow(er) under 65 $24,000 65 or older $25,300 * ** *** $ 5 If you were born before January 2, 1954, you are considered to be 65 or older at the end of 2018. (If your spouse died in 2018 or if you are preparing a return for someone who died in 2018, see Pub. 501.) Gross income means all income you receive in the form of money, goods, property, and services that isn't exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). It also includes gains, but not losses, reported on Form 8949 or Schedule D. Gross income from a business means, for example, the amount on Schedule C, line 7, or Schedule F, line 9. But, in figuring gross income, don't reduce your income by any losses, including any loss on Schedule C, line 7, or Schedule F, line 9. Don't include any social security benefits unless (a) you are married filing separately and you lived with your spouse at any time in 2018 or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). If (a) or (b) applies, see the Instructions for Form 1040 or Pub. 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. If you didn't live with your spouse at the end of 2018 (or on the date your spouse died) and your gross income was at least $5, you must file a return regardless of your age. Page 4 Chapter 1 2018 Filing Requirements Self-employed persons. If you are self-employed in a business that provides services (where the production, purchase, or sale of merchandise isn't an income-producing factor), gross income from that business is the gross receipts. If you are self-employed in a business involving manufacturing, merchandising, or mining, gross income from that business is the total sales minus the cost of goods sold. In either case, you must add any income from investments and from incidental or outside operations or sources. See Pub. 334, Tax Guide for Small Business, for more information. Dependents. If you could be claimed as a dependent by another taxpayer (that is, you meet the dependency tests in Pub. 501), special filing requirements apply. See Pub. 501. Decedents A personal representative of a decedent's estate can be an executor, administrator, or anyone who is in charge of the decedent's property. If you are acting as the personal representative of a person who died during the year, you may have to file a final return for that decedent. You also have other duties, such as notifying the IRS that you are acting as the personal representative. Form 56, Notice Concerning Fiduciary Relationship, is available for this purpose. When you file a return for the decedent, either as the personal representative or as the surviving spouse, you should write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. If no personal representative has been appointed by the due date for filing the return, the surviving spouse (on a joint return) should sign the return and write in the signature area “Filing as surviving spouse.” For more information, see Pub. 559, Survivors, Executors, and Administrators. Surviving spouse. If you are the surviving spouse, the year your spouse died is the last year for which you can file a joint return with that spouse. After that, if you don't remarry, you must file as a qualifying widow(er), head of household, or single. For more information about each of these filing statuses, see Pub. 501. If you remarry before the end of the year in which your spouse died, a final joint return with the deceased spouse can't be filed. You can, however, file a joint return with your new spouse. In that case, the filing status of your deceased spouse for his or her final return is married filing separately. The level of income that requires you to file an income tax return changes when your filing status CAUTION changes (see Table 1-1). Even if you and your deceased spouse weren't required to file a return for several years, you may have to file a return for tax years after the year of death. For example, if your filing status changes from filing jointly in 2017 to single in 2018 because of the death of your spouse, and your gross income is $17,500 ! for both years, you must file a return for 2018 even though you didn't have to file a return for 2017. 2. Taxable and Nontaxable Income Generally, income is taxable unless it is specifically exempt (not taxed) by law. Your taxable income may include compensation for services, interest, dividends, rents, royalties, income from partnerships, estate or trust income, gain from sales or exchanges of property, and business income of all kinds. Under special provisions of the law, certain items are partially or fully exempt from tax. Provisions that are of special interest to older taxpayers are discussed in this chapter. Compensation for Services Generally, you must include in gross income everything you receive in payment for personal services. In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. You need not receive the compensation in cash for it to be taxable. Payments you receive in the form of goods or services generally must be included in gross income at their fair market value. Volunteer work. Don't include in your gross income amounts you receive for supportive services or reimbursements for out-of-pocket expenses under any of the following volunteer programs. • • • • Retired Senior Volunteer Program (RSVP). Foster Grandparent Program. Senior Companion Program. Service Corps of Retired Executives (SCORE). Unemployment compensation. You must include in income all unemployment compensation you or your spouse (if married filing jointly) received. More information. See Pub. 525, Taxable and Nontaxable Income, for more detailed information on specific types of income. Chapter 2 Taxable and Nontaxable Income Page 5 Retirement Plan Distributions This section summarizes the tax treatment of amounts you receive from traditional individual retirement arrangements (IRA), employee pensions or annuities, and disability pensions or annuities. A traditional IRA is any IRA that isn't a Roth or SIMPLE IRA. A Roth IRA is an individual retirement plan that can be either an account or an annuity and features nondeductible contributions and tax-free distributions. A SIMPLE IRA is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. More detailed information can be found in Pub. 590-A, Contributions to Individual Retirement Arrangements; Pub. 590-B, Distributions from Individual Retirement Arrangements; and Pub. 575, Pension and Annuity Income. Individual Retirement Arrangements (IRAs) In general, distributions from a traditional IRA are taxable in the year you receive them. Exceptions to the general rule are rollovers, tax-free withdrawals of contributions, and the return of nondeductible contributions. These are discussed in Pub. 590-B. If you made nondeductible contributions to a traTIP ditional IRA, you must file Form 8606, Nondeductible IRAs. If you don't file Form 8606 with your return, you may have to pay a $50 penalty. Also, when you receive distributions from your traditional IRA, the amounts will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Early distributions. Generally, early distributions are amounts distributed from your traditional IRA account or annuity before you are age 591/2, or amounts you receive when you cash in retirement bonds before you are age 591/2. You must include early distributions of taxable amounts in your gross income. These taxable amounts also are subject to an additional 10% tax unless the distribution qualifies for an exception. For purposes of the additional 10% tax, an IRA is a qualified retirement plan. For more information about this tax, see Tax on Early Distributions under Pensions and Annuities, later. After age 591/2 and before age 701/2. After you reach age 591/2, you can receive distributions from your traditional IRA without having to pay the 10% additional tax. Even though you can receive distributions after you reach age 591/2, you must begin calculating and receiving required minimum distributions when you reach age 701/2. Required distributions. If you are the owner of a traditional IRA, you generally must receive the entire balance in your IRA or start receiving periodic distributions from your IRA by April 1 of the year following the year in which you reach age 701/2. See When Must You Withdraw Assets? (Required Minimum Distributions) in Pub. 590-B. If Page 6 Chapter 2 Taxable and Nontaxable Income distributions from your traditional IRA(s) are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required. For purposes of the 50% excise tax, an IRA is a qualified retirement plan. For more information about this tax, see Tax on Excess Accumulation under Pensions and Annuities, later. See also Excess Accumulations (Insufficient Distributions) in Pub. 590-B. Pensions and Annuities Generally, if you didn't pay any part of the cost of your employee pension or annuity, and your employer didn't withhold part of the cost of the contract from your pay while you worked, the amounts you receive each year are fully taxable. However, see Insurance Premiums for Retired Public Safety Officers, later. If you paid part of the cost of your pension or annuity plan (see Cost, later), you can exclude part of each annuity payment from income as a recovery of your cost (investment in the contract). This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. The rest of each payment is taxable. However, see Insurance Premiums for Retired Public Safety Officers, later. You figure the tax-free part of the payment using one of the following methods. • Simplified Method. You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). You can't use this method if your annuity is paid under a nonqualified plan. • General Rule. You must use this method if your an- nuity is paid under a nonqualified plan. You generally can't use this method if your annuity is paid under a qualified plan. Contact your employer or plan administrator to TIP find out if your pension or annuity is paid under a qualified or nonqualified plan. You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. Exclusion limit. If your annuity starting date is after 1986, the total amount of annuity income you can exclude over the years as a recovery of the cost can't exceed your total cost. Any unrecovered cost at your (or the last annuitant's) death is allowed as an other itemized deduction on the final return of the decedent. If you contributed to your pension or annuity and your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. The total exclusion may be more than your cost. Cost. Before you can figure how much, if any, of your pension or annuity benefits are taxable, you must determine your cost in the plan (your investment in the contract). Your total cost in the plan includes everything that you paid. It also includes amounts your employer contributed that were taxable to you when paid. However, see Foreign employment contributions, later. From this total cost, subtract any refunded premiums, rebates, dividends, unrepaid loans, or other tax-free amounts you received by the later of the annuity starting date or the date on which you received your first payment. Annuity starting date. The annuity starting date is the later of the first day of the first period for which you received a payment from the plan or the date on which the plan's obligations became fixed. The amount of your contributions to the plan may TIP be shown in box 9b of any Form 1099-R, Distribu- tions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., that you receive. Foreign employment contributions. If you worked abroad, certain amounts your employer paid into your retirement plan that weren't includible in your gross income may be considered part of your cost. For details, see Foreign employment contributions in Pub. 575. Withholding. The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable part of amounts paid to you. However, you can choose not to have tax withheld on the payments you receive, unless they are eligible rollover distributions. (These are distributions that are eligible for rollover treatment but aren't paid directly to another qualified retirement plan or to a traditional IRA.) See Withholding Tax and Estimated Tax and Rollovers in Pub. 575 for more information. For payments other than eligible rollover distributions, you can tell the payer how much to withhold by filing a Form W-4P, Withholding Certificate for Pension or Annuity Payments. Simplified Method. Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. For an annuity that is payable over the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. For any other annuity, this number is the number of monthly annuity payments under the contract. Who must use the Simplified Method. You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. 1. You receive your pension or annuity payments from a qualified plan. 2. On your annuity starting date, at least one of the following conditions applies to you. a. You are under age 75. b. You are entitled to less than 5 years of guaranteed payments. If your annuity starting date is after July 1, 1986, and before November 19, 1996, and you previously chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. You could have chosen to use the Simplified Method if your annuity is payable for your life (or the lives of you and your survivor annuitant) and you met both of the conditions listed above. Guaranteed payments. Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant don't live to receive the minimum. If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Who can't use the Simplified Method. You can't use the Simplified Method and must use the General Rule if you receive pension or annuity payments from: • A nonqualified plan, such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan; or • A qualified plan if you are age 75 or older on your annuity starting date and you are entitled to at least 5 years of guaranteed payments (defined above). In addition, you had to use the General Rule for either circumstance described above if your annuity starting date is after July 1, 1986, and before November 19, 1996. You also had to use it for any fixed-period annuity. If you didn't have to use the General Rule, you could have chosen to use it. You also had to use the General Rule for payments from a qualified plan if your annuity starting date is before July 2, 1986, and you didn't qualify to use the Three-Year Rule. If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Unless your annuity starting date was before 1987, once you have recovered all of your non-taxable investment, all of each remaining payment you receive is fully taxable. Once your remaining payments are fully taxable, there is no longer a concern with the General Rule or Simplified Method. Complete information on the General Rule, including the actuarial tables you need, is contained in Pub. 939, General Rule for Pensions and Annuities. How to use the Simplified Method. Complete the Simplified Method Worksheet in the Form 1040 or Form 1040NR instructions or in Pub. 575 to figure your taxable annuity for 2018. Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. How you do this depends on whether the Chapter 2 Taxable and Nontaxable Income Page 7 annuity is for a single life, multiple lives, or a fixed period. For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. You don't need to complete line 3 of the work- TIP sheet or make the computation on line 4 if you re- ceived annuity payments last year and used last year's worksheet to figure your taxable annuity. Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Single-life annuity. If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Enter on line 3 the number shown for your age on your annuity starting date. This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Multiple-lives annuity. If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. Don't treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. However, if your annuity starting date is before 1998, don't use Table 2 and don't combine the annuitants' ages. Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Fixed-period annuities. If your annuity doesn't depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. Line 6. The amount on line 6 should include all amounts that could have been recovered in prior years. If you didn't recover an amount in a prior year, you may be able to amend your returns for the affected years. Be sure to keep a copy of the completed work- TIP sheet; it will help you figure your taxable annuity in later years. Example. Bill Smith, age 65, began receiving retirement benefits in 2018, under a joint and survivor annuity. Bill's annuity starting date is January 1, 2018. The benefits Page 8 Chapter 2 Taxable and Nontaxable Income are to be paid over the joint lives of Bill and his wife, Kathy, age 65. Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. See the illustrated Worksheet 2-A, Simplified Method Worksheet, later. You can find a blank version of this worksheet in Pub. 575. (The references in the illustrated worksheet are to sections in Pub. 575.) His annuity is payable over the lives of more than one annuitant, so Bill uses his and Kathy's combined ages, 130 (65 + 65), and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet. He finds the line 3 amount to be 310. Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Upon Bill's death, if Bill hasn't recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. The full amount of any annuity payments received after 310 payments generally must be included in gross income. If Bill and Kathy die before 310 payments are made, an other itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Survivors of retirees. Benefits paid to you as a survivor under a joint and survivor annuity must be included in your gross income in the same way the retiree would have included them in gross income. If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule, include the total received in your income. The retiree's cost has already been recovered tax free. If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage the retiree used to your initial payment called for in the contract. The resulting tax-free amount will then remain fixed. Any increases in the survivor annuity are fully taxable. If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. See Simplified Method, earlier. How to report. If you file Form 1040, report your total annuity on line 4a, and the taxable part on line 4b. If your pension or annuity is fully taxable, enter it on line 4b. Don't make an entry on line 4a. If you file Form 1040NR, report your total annuity on line 17a, and the taxable part on line 17b. If your pension or annuity is fully taxable, enter it on line 17b. Don't make an entry on line 17a. Example. You are a Form 1040 filer and you received monthly payments totaling $1,200 (12 months x $100) during 2018 from a pension plan that was completely Worksheet 2-A. Simplified Method Worksheet—Illustrated Keep for Your Records 1. Enter the total pension or annuity payments received this year. Also, add this amount to the total for Form 1040, line 4a or Form 1040NR, line 17a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion.* See Cost (Investment in the Contract), earlier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note. If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Otherwise, go to line 3. 3. Enter the appropriate number from Table 1 below. But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Divide line 2 by the number on line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Multiply line 4 by the number of months for which this year's payments were made. If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Otherwise, go to line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Enter any amount previously recovered tax free in years after 1986. This is the amount shown on line 10 of your worksheet for last year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Subtract line 6 from line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Enter the smaller of line 5 or line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Taxable amount for year. Subtract line 8 from line 1. Enter the result, but not less than zero. Also, add this amount to the total for Form 1040, line 4b or Form 1040NR, line 17b. Note. If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers, earlier, before entering an amount on your tax return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Was your annuity starting date before 1987? Yes. STOP. Don't complete the rest of this worksheet. 1. $ 14,400 2. 31,000 3. 310 4. 100 5. 1,200 6. 0 7. 31,000 8. 1,200 9. $ 13,200 No. Add lines 6 and 8. This is the amount you have recovered tax free through 2018. You will need this number if you need to fill out this worksheet next year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 11. Balance of cost to be recovered. Subtract line 10 from line 2. If zero, you won't have to complete this worksheet next year. The payments you receive next year generally will be fully taxable . . . . . . . . 11. 1,200 $ 29,800 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Table 1 for Line 3 Above AND your annuity starting date was— IF your age on your annuity starting date was . . . BEFORE November 19, 1996, enter on line 3 . . . 55 or under 56 – 60 61 – 65 66 – 70 71 or over 300 260 240 170 120 AFTER November 18, 1996, enter on line 3 . . . 360 310 260 210 160 Table 2 for Line 3 Above IF the annuitants' combined ages on your annuity starting date were . . . THEN enter on line 3 . . . 110 or under 111 – 120 121 – 130 131 – 140 141 or over 410 360 310 260 210 Chapter 2 Taxable and Nontaxable Income Page 9 financed by your employer. You had paid no tax on the payments that your employer made to the plan, and the payments weren't used to pay for accident, health, or long-term care insurance premiums (as discussed later under Insurance Premiums for Retired Public Safety Officers). The entire $1,200 is taxable. You include $1,200 only on Form 1040, line 4b. Joint return. If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on line 4a of Form 1040 or line 17a of Form 1040NR. Report the total of the taxable parts on line 4b of Form 1040 or line 17b of Form 1040NR. Form 1099-R. You should receive a Form 1099-R for your pension or annuity. Form 1099-R shows your pension or annuity for the year and any income tax withheld. You should receive a Form W-2 if you receive distributions from certain nonqualified plans. You must attach Forms 1099-R or Forms W-2 to your 2018 tax return if federal income tax was CAUTION withheld. Generally, you should be sent these forms by January 31, 2019. ! Tax on Early Distributions Most distributions you receive from your qualified retirement plan and nonqualified annuity contracts before you reach age 591/2 are subject to an additional tax of 10%. The tax applies to the taxable part of the distribution. For this purpose, a qualified retirement plan is: • A qualified employee plan (including a qualified cash or deferred arrangement (CODA) under Internal Revenue Code section 401(k)), • A qualified employee annuity plan, • A tax-sheltered annuity plan (403(b) plan), • An eligible state or local government section 457 de- ferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA), or • An IRA. ! CAUTION You may have to pay a 25%, rather than a 10%, additional tax if you receive distributions from a SIMPLE IRA before you are age 591/2. See Pub. Nonperiodic Distributions 560. If you receive a nonperiodic distribution from your retirement plan, you may be able to exclude all or part of it from your income as a recovery of your cost. Nonperiodic distributions include cash withdrawals, distributions of current earnings (dividends) on your investment, and certain loans. For information on how to figure the taxable amount of a nonperiodic distribution, see Taxation of Nonperiodic Payments in Pub. 575. General exceptions to tax. The early distribution tax doesn't apply to any distributions that are: ! CAUTION The taxable part of a nonperiodic distribution may be subject to an additional 10% tax. See Tax on Early Distributions, later. Lump-sum distributions. If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. The part from participation after 1973 (and any part from participation before 1974 that you don't report as capital gain) is ordinary income. You may be able to use the 10-year tax option (explained in Pub. 575) to figure tax on the ordinary income part. Form 1099-R. If you receive a total distribution from a plan, you should receive a Form 1099-R. If the distribution qualifies as a lump-sum distribution, box 3 shows the capital gain part of the distribution. The amount in box 2a, Taxable amount, minus the amount in box 3, Capital gain, is the ordinary income part. More information. For more detailed information on lump-sum distributions, see Pub. 575 or Form 4972, Tax on Lump-Sum Distributions. Page 10 Chapter 2 Taxable and Nontaxable Income • Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after separation from service), • Made because you are totally and permanently disabled, or • Made on or after the death of the plan participant or contract holder. Additional exceptions. There are additional exceptions to the early distribution tax for certain distributions from qualified retirement plans and nonqualified annuity contracts. See Pub. 575 and Pub. 590-B for details. Reporting tax. If you owe only the tax on early distributions, you generally must file Form 5329. But you don't have to file Form 5329 if distribution code 1 (early distribution, no known exception) is correctly shown in box 7 of all your Forms 1099-R, and you owe the additional tax on each Form 1099-R. Instead, multiply the taxable part of the early distribution by 10% (0.10) and enter the result on Schedule 4 (Form 1040), line 59, or Form 1040NR, line 57. See the instructions for Schedule 4 (Form 1040), line 59 or line 57 of Form 1040NR for more information about reporting the early distribution tax. Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date. Unless the rule for 5% owners applies, this is generally April 1 of the year that follows the later of: • The calendar year in which you reach age 701/2, or • The calendar year in which you retire from employment with the employer maintaining the plan. However, your plan may require you to begin to receive payments by April 1 of the year that follows the year in which you reach 701/2, even if you haven't retired. For this purpose, a qualified retirement plan includes: • • • • A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, A tax-sheltered annuity plan (403(b) plan) (for benefits accruing after 1986), or • An IRA. An excess accumulation is the undistributed re- TIP mainder of the required minimum distribution that was left in your qualified retirement plan. 5% owners. If you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the company maintaining your qualified retirement plan, you must begin to receive distributions from the plan by April 1 of the year after the calendar year in which you reach age 701/2. See Pub. 575 for more information. Amount of tax. If you don't receive the required minimum distribution, you are subject to an additional tax. The tax equals 50% of the difference between the amount that must be distributed and the amount that was distributed during the tax year. You can get this excise tax excused if you establish that the shortfall in distributions was due to reasonable error and that you are taking reasonable steps to remedy the shortfall. Form 5329. You must file a Form 5329 if you owe a tax because you didn't receive a minimum required distribution from your qualified retirement plan. Additional information. For more detailed information on the tax on excess accumulation, see Pub. 575. Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. The premiums can be for coverage for you, your spouse, or dependent(s). The distribution must be made directly from the plan to the insurance provider. You can exclude from income the smaller of the amount of the insurance premiums or $3,000. You can only make this election for amounts that would otherwise be included in your income. The amount excluded from your income can't be used to claim a medical expense deduction. An eligible retirement plan is a governmental plan that is a: • • • • Qualified trust, Section 403(a) plan, Section 403(b) annuity, or Section 457(b) plan. If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. The taxable amount shown in box 2a of any Form 1099-R that you receive doesn't reflect the exclusion. Report your total distributions on Form 1040, line 4a or Form 1040NR, line 17a. Report the taxable amount on Form 1040, line 4b or Form 1040NR, line 17b. Enter “PSO” next to the appropriate line on which you report the taxable amount. Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. These categories are treated differently for income tax purposes. Social security equivalent benefits. The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and is treated for tax purposes like social security benefits. (See Social Security and Equivalent Railroad Retirement Benefits, later.) Non-social security equivalent benefits. The second category contains the rest of the tier 1 benefits, called the non-social security equivalent benefit (NSSEB). It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. This category of benefits is treated as an amount received from a qualified employee plan. This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. VDBs and supplemental annuity benefits are non-contributory pensions and are fully taxable. More information. For more information about railroad retirement benefits, see Pub. 575. Military Retirement Pay Military retirement pay based on age or length of service is taxable and must be included in income as a pension on Form 1040, lines 4a and 4b or on Form 1040NR, lines 17a and 17b. But, certain military and government disability pensions that are based on a percentage of disability Chapter 2 Taxable and Nontaxable Income Page 11 from active service in the Armed Forces of any country generally aren't taxable. For more information, including information about veterans' benefits and insurance, see Pub. 525. Social Security and Equivalent Railroad Retirement Benefits This discussion explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. Social security benefits include monthly retirement, survivor, and disability benefits. They don't include supplemental security income (SSI) payments, which aren't taxable. Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. They commonly are called the social security equivalent benefit (SSEB) portion of tier 1 benefits. If you received these benefits during 2018, you should have received a Form SSA-1099 or Form RRB-1099 (Form SSA-1042S or Form RRB-1042S if you are a nonresident alien), showing the amount of the benefits. Social Security Information Obtaining social security information. Social security beneficiaries may quickly and easily obtain various information from the SSA's website with a my Social Security account to: • Keep track of your earnings and verify them every year, • Get an estimate of your future benefits if you are still working, • Get a letter with proof of your benefits if you currently receive them, • • • • Change your address, Start or change your direct deposit, To find out whether any of your benefits may be taxable, compare the base amount for your filing status (explained later) with the total of: • One-half of your benefits; plus • All your other income, including tax-exempt interest. When making this comparison, don't reduce your other income by any exclusions for: • • • • Interest from qualified U.S. savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned in American Samoa or Puerto Rico by bona fide residents. Figuring total income. To figure the total of one-half of your benefits plus your other income, use Worksheet 2-B. If that total amount is more than your base amount, part of your benefits may be taxable. If you are married and file a joint return for 2018, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Even if your spouse didn't receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. If the only income you received during 2018 was TIP your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally aren't taxable and you probably don't have to file a return. If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. Base Amount Your base amount is: • $25,000 if you are single, head of household, or qualifying widow(er); • $25,000 if you are married filing separately and lived apart from your spouse for all of 2018; • $32,000 if you are married filing jointly; or • $0 if you are married filing separately and lived with your spouse at any time during 2018. Get a replacement Medicare card, and Repayment of Benefits Get a replacement SSA-1099 or SSA-1042S for the tax season. Any repayment of benefits you made during 2018 must be subtracted from the gross benefits you received in 2018. It doesn't matter whether the repayment was for a benefit you received in 2018 or in an earlier year. If you repaid more than the gross benefits you received in 2018, see Repayments More Than Gross Benefits, later. For more information and to set up an account, go to SSA.gov/myaccount. Are Any of Your Benefits Taxable? Note. When the term “benefits” is used in this section, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. Page 12 Chapter 2 Taxable and Nontaxable Income Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Your repayments are shown in box 4. The amount in box 5 shows your net benefits for 2018 (box 3 minus box 4). Use the amount in box 5 to figure whether any of your benefits are taxable. Worksheet 2-B. A Quick Way To Check if Your Benefits May Be Taxable A. Keep for Your Records Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Include the full amount of any lump-sum benefit payments received in 2018, for 2018 and earlier years. (If you received more than one form, combine the amounts from box 5 and enter the total.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. Note. If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. B. Enter one-half of the amount on line A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B. C. Enter your taxable pensions, wages, interest, dividends, and other taxable income . . . . . . . . C. D. Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income for: • Interest from qualified U.S. savings bonds, • Employer-provided adoption benefits, • Foreign earned income or foreign housing, or • Income earned in American Samoa or Puerto Rico by bona fide residents . . . . . . . . . . . . . . D. E. Add lines B, C, and D and enter the total .......................................... E. F. If you are: • Married filing jointly, enter $32,000; • Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2018, enter $25,000; or • Married filing separately and you lived with your spouse at any time during 2018, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F. G. Is the amount on line F less than or equal to the amount on line E? No. None of your benefits are taxable this year. Yes. Some of your benefits may be taxable. To figure how much of your benefits are taxable, see Which worksheet to use under How Much Is Taxable. Tax Withholding and Estimated Tax You can choose to have federal income tax withheld from your social security and/or the SSEB portion of your tier 1 railroad retirement benefits. If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Request. If you don't choose to have income tax withheld, you may have to request additional withholding from other income, or pay estimated tax during the year. For details, see Pub. 505, Tax Withholding and Estimated Tax, or the Instructions for Form 1040-ES, Estimated Tax for Individuals. How Much Is Taxable? If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. Generally, the higher that total amount, the greater the taxable part of your benefits. Maximum taxable part. The taxable part of your benefits usually can't be more than 50%. However, up to 85% of your benefits can be taxable if either of the following situations applies to you. • The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). • You are married filing separately and lived with your spouse at any time during 2018. If you are a nonresident alien, 85% of your benefits are taxable. However, this income is exempt under some tax treaties. Which worksheet to use. A worksheet to figure your taxable benefits is in the instructions for your Form 1040. However, you will need to use a different worksheet(s) if any of the following situations applies to you. 1. You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse were covered by a retirement plan at work. In this situation, you must use the special worksheets in Pub. 590-A to figure both your IRA deduction and your taxable benefits. 2. Situation (1) doesn't apply and you take one or more of the following exclusions. • Interest from qualified U.S. savings bonds (Form 8815). • Employer-provided adoption benefits (Form 8839). • Foreign earned income or housing (Form 2555 or Form 2555-EZ). • Income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. Chapter 2 Taxable and Nontaxable Income Page 13 In these situations, you must use Worksheet 1 in Pub. 915, Social Security and Equivalent Railroad Retirement Benefits, to figure your taxable benefits. 3. You received a lump-sum payment for an earlier year. In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Pub. 915. See Lump-Sum Election, later. How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040 or Form 1040NR. Reporting on Form 1040. Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 5a and the taxable part on line 5b. If you are married filing separately and you lived apart from your spouse for all of 2018, also enter “D” to the right of the word “benefits” on line 5a. Reporting on Form 1040NR. Report 85% of the total amount of your benefits (box 5 of your Form SSA-1042S or Form RRB-1042S) in the appropriate column of Form 1040NR, Schedule NEC, line 8. Benefits not taxable. Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 5a. Enter -0- on Form 1040, line 5b. If you are married filing separately and you lived apart from your spouse for all of 2018, also enter “D” to the right of the word “benefits” on Form 1040, line 5a. Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2018 in your 2018 income, even if the payment includes benefits for an earlier year. This type of lump-sum benefit payment shouldn't TIP be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. No part of the lump-sum death benefit is subject to tax. For more information about the lump-sum death benefit, visit the Social Security Administration website at SSA.gov, and use keyword: death benefit. Generally, you use your 2018 income to figure the taxable part of the total benefits received in 2018. However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers your taxable benefits. See Pub. 915 for more information. Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. If this occurred, your net benefits in box 5 will be a Page 14 Chapter 2 Taxable and Nontaxable Income negative figure (a figure in parentheses) and none of your benefits will be taxable. If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. If you have any questions about this negative figure, contact your local Social Security Administration office or your local U.S. Railroad Retirement Board field office. Joint return. If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's doesn't, subtract the box 5 amount on your form from the box 5 amount on your spouse's form. You do this to get your net benefits when figuring if your combined benefits are taxable. Repayment of benefits received in an earlier year. If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. The deduction must be more than $3,000 and you have to follow some special instructions. See Pub. 915 for those instructions. Sickness and Injury Benefits Generally, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. However, certain payments may not be taxable to you. Some of these payments are discussed later in this section. Also, see Military and Government Disability Pensions and Other Sickness and Injury Benefits in Pub. 525. Cost paid by you. If you pay the entire cost of an accident or health plan, don't include any amounts you receive from the plan for personal injury or sickness as income on your tax return. If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on line 1
2018 Publication 554
More about the Federal Publication 554 Individual Income Tax
Pub 554 is a yearly IRS publication that contains hundreds of pages of income tax information and instructions specifically tailored towards seniors and retired taxpayers.
We last updated the Tax Guide for Seniors in January 2019, and the latest form we have available is for tax year 2018. This means that we don't yet have the updated form for the current tax year. Please check this page regularly, as we will post the updated form as soon as it is released by the Federal Internal Revenue Service. You can print other Federal tax forms here.
Other Federal Individual Income Tax Forms:
|Form Code||Form Name|
|Form 1040||U.S. Individual Income Tax Return|
|Form 1040-V||Payment Voucher|
|1040 (Schedule B)||Interest and Ordinary Dividends|
|1040 (Schedule A)||Itemized Deductions|
|Form 1040-INS||Form 1040 Instructional Booklet|
The Internal Revenue Service usually releases income tax forms for the current tax year between October and January, although changes to some forms can come even later. We last updated Federal Publication 554 from the Internal Revenue Service in January 2019.
About the Individual Income Tax
The IRS and most states collect a personal income tax, which is paid throughout the year via tax withholding or estimated income tax payments.
Most taxpayers are required to file a yearly income tax return in April to both the Internal Revenue Service and their state's revenue department, which will result in either a tax refund of excess withheld income or a tax payment if the withholding does not cover the taxpayer's entire liability. Every taxpayer's situation is different - please consult a CPA or licensed tax preparer to ensure that you are filing the correct tax forms!
Historical Past-Year Versions of Federal Publication 554
We have a total of four past-year versions of Publication 554 in the TaxFormFinder archives, including for the previous tax year. Download past year versions of this tax form as PDFs here:
2018 Publication 554
2017 Publication 554
2015 Publication 554
2015 Publication 554
While we do our best to keep our list of Federal Income Tax Forms up to date and complete, we cannot be held liable for errors or omissions. Is the form on this page out-of-date or not working? Please let us know and we will fix it ASAP.