How Do I Report Distributions From Pension/401K Plans or IRAs?

If you receive a distribution from a qualified pension plan or an individual retirement account, you should receive Form 1099-R at year end, which will detail the items reportable. Generally, you must report both the GROSS amount of the distribution, as well as the TAXABLE portion, as indicated on the form.

If these two figures are not the same, then your distribution likely includes a return of "after tax" contributions made to the plan. Since you did not receive a deduction for this portion when you contributed it to the plan, it is not taxable to you when it is withdrawn. The amount that is taxable to you is made up of before- tax contributions to the plan, as well as earnings during the time that the income was sheltered by the plan.

If your Form 1099-R indicates that the taxable portion has not been determined:

  • If this is an IRA, and you have not made any non-deductible contributions at any time, the distribution is fully taxable. If you have made non-deductible IRA contributions, subtract your unrecovered non-deductible contributions from the combined balances of your IRA accounts at 12/31/94 of the tax year; the ratio of this result to the total IRA balances is the same percentage of your gross distribution that would be taxable.

  • If this is not an IRA, see the instructions for Form 1040 for the method that must be used to calculate the taxable portion.
If you received the distribution before turning age 59 1/2, you may owe a penalty in addition to tax on this distribution. See Form 5329 for details.

If you rolled over to an IRA a portion of the distribution that is shown as taxable on Form 1099-R, you need to indicate the gross amount and the taxable amount reduced by the amount rolled over.

If you received a total distribution of the proceeds from your retirement plan, and did not rollover any part of that distribution, check the instructions for Form 4972 to see if you qualify for a special method of calculating the tax.

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