Understanding Form 1099-R: Pension & Retirement Income Taxes

You have to pay taxes on funds received from your pension in any given year. This includes annuities or dividends paid out, but it also includes loan sums and withdrawals in some cases. Your pension payer will provide you with the information needed to fill out a 1099-R. In most cases, the payer is not responsible for determining the taxes, you are.

Why Do I Owe Taxes on My IRA?

The first thing to understand is your IRA payments are classified as "earnings." Anytime you have an earning under IRS law, you must declare it and pay taxes. However, depending on how the funds were taxed when you contributed them, you will owe a different amount once you withdraw them. For an IRA, you will need to elect to receive funds if you are over 70 1/2, or you may face additional taxes. If your pension contributions started after 1997, then you may be able to complete your tax forms with a 1040 instead of a 1099-R, which will be easier for you.

Filling Out the Form:

Determine how much you will owe by filling out the 1099-R.

1. The payer's ID number should already be provided. If not, then contact your pension payer to have this. The recipient will be you, and you can fill in your own social security number.
   
   
2. Next, the two major things you need to know is: the total amount you earned from your pension, and the taxable amount you received. 
   
   
3. Enter the total amount in Box 1 and the taxable amount in Box 2a.
   
   
4. Boxes 4, 5, and 6 are no more complicated. Enter the amount withheld on your withdraws in Box 4, your after-tax investment in Box 5, and appreciations of stock that you have not sold yet in Box 6.
   
   
5. Boxes 7-15 contain information regarding how you managed your IRA during the course of the year, and you will need to fill these out as well. Boxes 10-15 involve state taxes.