The IRS has updated the information it provides for determining the tax treatment of pension and annuity income under the General Rule. The information is contained in revised Publication 939, General Rule for Pensions and Annuities, which the IRS has updated for 2022 reporting. The publication also addresses reporting concerning 403(b)s.
The General Rule is one of the two methods used to figure the tax-free part of each annuity payment based on the ratio of one’s investment in the contract to the total expected return. The other method is the Simplified Method, which is discussed in Pub. 575, Pension and Annuity Income.
Publication 939 is useful for those who receive pension or annuity payments from:
- a qualified plan if:
- the annuity starting date is before Nov. 19, 1996 (and after July 1, 1986 and one doesn’t qualify to use, or didn't choose to use, the Simplified Method; or
- the annuity starting date is after Nov. 18, 1996, and as of that date one is age 75 or over and the annuity payments are guaranteed for at least five years.
Or from a nonqualified plan, such as:
- a private annuity;
- a purchased commercial annuity;
- or a nonqualified employee plan).
403(b)s and Roths. Publication 939 also covers the treatment of benefits under 403(b) plans and discusses in-plan Roth rollovers from 403(b) plans to designated Roth accounts.
Finding out More
Publication 939 is available here: https://www.irs.gov/pub/irs-prior/p939--2022.pdf
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