Regardless of whether the taxpayer is over or under age 59 1/2, the amount received from an annuity that is not part of an employer-sponsored plan or a commonly recognized retirement program could be taxable for PA personal income tax purposes. However, the method for reporting the amount depends upon the tax year. For tax years beginning before January 1, 2005 the cost recovery method was used to report distributions from a taxable annuityon PA Schedule D. The cost recovery method assumes that all of the taxpayers' contributions received first (whichare not taxable) beforereceiving taxable income. Once all the costs of the annuity were received back from the annuity, the remaining amounts received were taxable. The amount taxable was reported on Line 10 of the PA-40 Schedule D.
Reminderone can file and/or view your PA-40 return through the PA tax portal myPATH.
For taxable years beginning after December 31, 2004, distributions from an annuity, life insurance or endowment contract are taxable as interest income to the extent the distributions are taxable for federal income tax purposes. For PA purposes, the amounts of the distributions received are 'recorded' on PA-40 Schedule W-2S, Part B. However, the amount taxable for federal income tax purposes is 'reported' on PA Schedule A, Line 11. To record the amount of distributions received on PA-40 Schedule W-2S, complete the schedule as follows:
1. Fill in Column A with the appropriate taxpayer (T) or spouse (S) indicator;
2. Fill in Column B with payment type K;
3. List the payer's name in Column C;
4. List the distribution code (usually codes 1D, 2D, 3D, or7D) from Box 7 of the 1099-R in Column D;
5. Enter the total federal amount of the distribution from Box 1 of the 1099-R in Column E;
6. Enter no amount in Column F;
7. Enter a zero in Column G; and
8. Enter the amount of any PA tax erroneously withheld from Box 10 of the 1099-R.
For all taxable years, the amount received/distributed by a taxpayer from a retirement plan or IRA could be taxable to the recipient. Several factors determine whether the distribution is taxable. The distribution code, type of retirement plan and age all can affect whether the distribution is taxable. Regardless of whether the amount is taxable or nontaxable, all distributions received from retirement plans are recorded on PA-40 Schedule W-2S, Part B. IRS Form 1099-R should be received and used to report distributions from the retirement plan. To record the amount received as a distribution from a retirement plan, use PA-40 Schedule W-2S. Complete the schedule as follows:
1. Fill in Column A with the appropriate taxpayer (T) or spouse (S) indicator;
2. Fill in Column B with payment type from the list provided on the form;
3. Enter the payer's name from the 1099-R in Column C;
4. Enter the distribution code from Box 7 of the 1099-R in Column D;
5. Enter the total federal amount of the distribution from Box 1 of the 1099-R in Column E;
6. Enter the appropriate amount of adjusted basis in Column F based upon the PA-40 Schedule W-2S. Part B, instructions for the distribution code in Column D;
7. Enter either a zero in Column G or Column E less Column F based upon the PA-40 Schedule W-2S, Part B, instructions for the distribution code in Column D; and
8. Enter the amount of any PA tax withheld from Box 10 of the 1099-R.
Note: You must reference the PA-40 Schedule W-2S, Part B, instructions to complete the schedule and determine what amounts to report in columns F and G. For additional information on what codes may be taxable for PA personal income tax purposes, see the instructions for Line 1a, Gross Compensation, in the PA-40 Instructions booklet. Both items can be also found on the department's website under the personal income tax menu item of the forms and publications folder.
Include all 1099-Rs reported on PA Schedule W-2S with all paper copies of returns. For electronically filed returns, the department receives copies of the forms with the return for any return filed as part of the fed/state e-file system that is not a state only filed form. Returns not part of the fed/state e-file system that are filed as state only returns should have the 1099-R forms faxed to the PA Department of Revenue at 717-772-4193 or 717-787-2840 oremail a PDF version toRA-BITPITELFCORFAXES@pa.gov. The department reserves the right to request physical copies of 1099-Rs even though provided by electronic format and to request verification of any PA tax withheld and reported on such forms.
