Table - Federal Form 1099R Reconciliation for Pennsylvania Personal Income Tax

Federal Form 1099R Box Number Federal Treatment Pennsylvania Personal Income Tax Treatment 1 Shows the total amount you received this year. The amount may have been a direct rollover, a transfer, or conversion to a Roth IRA, a recharacterized IRA contribution; or you may have received it as periodic payments, as non-periodic payments, or as a total distribution. Unless this amount is from a Coverdell Education Savings Account, report it on Form 1040 or 1040A on the line for “IRA distributions” or “Pensions and annuities” (or the line for “Taxable amount”), and on Form 8606, whichever applies. However, if this is a lump-sum distribution, report it on federal Form 4972, Tax on Lump-Sum Distribution. If you have not reached minimum retirement age, report your disability payments on the line for “Wages, salaries, tips, etc.” Also report on that line corrective distribution of excess deferrals, excess contributions, or excess aggregate contributions. If a life insurance, annuity, or endowment contract was transferred tax-free to another trustee or contract issuer, an amount will be shown in this Box and Code 6 will be shown in Box 7. Do not report this on the tax return. Under PA PIT law, this distribution is taxable for Pennsylvania purposes if: the pension or retirement plan was NOT an eligible plan for PA PIT purposes; or you retired before meeting the age conditions of the plan or years of service conditions of the plan. If this distribution is taxable to you under either of the two rules above, then you may use the cost recovery method to determine the taxable portion of this distribution. Cost Recovery Method – Residents The “cost recovery method” provides for tax-free distribution of all prior employee contributions (since they were previously taxed) before distribution of employer contributions and investment appreciation (which are subject to tax). Cost Recovery Method – Non-Residents Persons who reside outside of Pennsylvania but have worked in Pennsylvania and receive retirement benefits from such Pennsylvania employer must use the “cost recovery method” as indicated under “Cost Recovery Method – Residents” above. Persons who contributed to a retirement plan while a Pennsylvania resident, but have moved out of Pennsylvania, are subject to tax on the income allocable to Pennsylvania over and above their contributions. Residents who contributed to a retirement plan while a nonresident are subject to tax only on the amount received over and above their contributions, regardless of whether tax was paid to another state on the retirement income. Cost Recovery Method - Annuities and Insurance Contracts To determine prior employee contributions paid on annuities or insurance contracts, consult your plan administrator as to your full cost of the annuity. 2a This part of the distribution is generally taxable. If there is no entry in this Box, the payer may not have all the facts needed to figure the taxable amount. In that case, the first Box in Box 2b should be checked. You may want to get one of the following publications from the IRS to help you figure the taxable amount - Pub. 560, Pub. 571, Tax-Sheltered Annuity Plans (403(b) Plans) for Employees of Public Schools and Certain Tax-Exempt Organizations, Pub. 575, Pub. 590, Pub. 721, Tax Guide to U.S. Civil Service Retirement Benefits, or Pub. 939, General Rule for Pensions and Annuities. For an IRA distribution, refer to IRAs and Roth IRAs above. For a direct rollover, zero should be shown, and you must enter zero (-0-) on the “Taxable amount” line of your tax return. If this is a total distribution from a qualified plan (other than an IRA or tax-sheltered annuity) and you were born before 1936 (or you are the beneficiary of someone born before 1936), you may be eligible for the 10-year tax option. Refer to the Instructions for federal Form 4972 for more information. Not applicable to PA PIT. Refer to PA PIT treatment in Box 1 above. 2b If the first checkbox is checked, the payer was unable to determine the taxable amount, and Box 2a should be blank. However, if this is a traditional IRA, SEP, or SIMPLE distribution, then refer to IRAs above. If the second checkbox is checked, the distribution was a total distribution that closed out your account. Not applicable to PA PIT. Refer to PA PIT treatment in Box 1 above. 3 If a lump-sum distribution was received from a qualified plan and the taxpayer was born before 1936 (or is a beneficiary of someone born before 1936), you may be able to elect to treat this amount as a capital gain on federal Form 4972 (not on Schedule D (federal Form 1040)). Refer to the Instructions for federal Form 4972. For a charitable gift annuity, report as a long-term capital gain on Schedule D (federal Form 1040). Under PA PIT law, a lump sum distribution is taxable if– Your pension or retirement plan was NOT an “eligible Pennsylvania retirement plan,” or You retired before meeting the age conditions of the plan or years of service conditions of the plan. If this distribution is taxable under either of the two rules above, then you may use the “cost recovery method” to report the taxable portion of this distribution. For PA PIT there are no provisions for capital gain. The distribution is reported as gross compensation not as sale, exchange, or disposition of property. 4 This is the amount of federal income tax withheld. Include this on your income tax return as tax withheld, and if Box 4 shows an amount (other than zero), attach Copy B to your return. Generally, if you will receive payments next year that are not eligible rollover distributions, you can change your withholding or elect not to have income tax withheld by giving the payer Form W-4P, Withholding Certificate for Pension or Annuity Payments. Not applicable to PA PIT Refer to PA PIT treatment in Box 1 above 5 Generally, this shows the employee’s investment in contract (after-tax contributions), if any, recovered tax free this year; the part of premiums paid on commercial annuities or insurance contracts recovered tax free; or the nontaxable part of a charitable gift annuity. This Box does not show any IRA contributions. Generally, this shows the employee’s investment in an annuity contract. Refer below for after-tax contributions. if any, recovered tax free this year; the part of premiums paid on commercial annuities or insurance contracts recovered tax free; or the nontaxable part of a charitable gift annuity. This Box does not show any IRA contributions. Cost Recovery Method of Taxation of Retirement Distributions (if applicable) PA PIT law provides for the cost recovery method of taxation of retirement distributions if such distributions are – From a non-eligible retirement plan, and Distributed prior to the participant meeting the: Retirement age or Years of service, requirements under the plan. The cost recovery method provides for recovery of all prior employee contributions prior to taxation of distributions. To determine prior employee contributions consult your plan administrator as to your full cost of the annuity. “After-tax contributions” employee means contributions (usually deducted from pay) that the employee makes to his or her plan, annuity, etc. Since the employee has already been subject to tax on their contributions, these contributions are referred to as after tax contributions. 6 If you received a lump-sum distribution from a qualified plan that includes securities of the employer’s company, the net unrealized appreciation (NUA) (any increase in value of such securities while in the trust) is taxed only when you sell the securities unless you choose to include it in your gross income this year. Refer to Pub. 575 and the Instructions for federal Form 4972. If you did not receive a lump-sum distribution, the amount shown is the NUA attributable to employee contributions, which is not taxed until you sell the securities. Under PA PIT law, provided there is no constructive receipt, unrealized appreciation from securities held in trust is not taxable unless the securities are sold. 7 The following codes identify the distribution you received The following codes identify the distribution you received 1– Early distribution, no known exception (in most cases, under age 59½). Refer to federal Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. For a rollover to a traditional IRA of the entire taxable part of the distribution, do not file federal Form 5329. Refer to the federal Form 1040/1040A instructions. 1 – Under PA PIT law, this distribution is taxable for PA purposes if – Your pension or retirement plan was not an eligible plan for PA PIT purposes or You retired before meeting the age conditions of the plan or years of service conditions of the plan. If this distribution is taxable to you under either of the two rules above, then you may use the cost recovery method to determine the taxable portion of this distribution. Please refer to Cost Recovery Method information above for more information. 2– Early distribution, exception applies (under age 59½). 2– Under PA PIT law, this distribution is taxable for PA purposes if – Your pension or retirement plan was NOT an eligible plan for PA PIT purposes or You retired before meeting the age conditions of the plan or years of service conditions of the plan. If this distribution is taxable to you under either of the two rules above, then you may use the cost recovery method to determine the taxable portion of this distribution. 3 – Disability. 3 – Under PA PIT law, a distribution due to disability generally is not taxable. 4– Death. 4– Under PA PIT law, a distribution due to death is not taxable. 5 - Prohibited transaction. 5– Not applicable - PA PIT has no provisions for prohibited transactions. 6– Section 1035 exchange (a tax-free exchange of life insurance, annuity, or endowment contracts). 6– For taxable years beginning after Dec. 31, 2004, Act 40 of Jul. 7, 2005 provides that exchanges of insurance contracts listed under IRC Section 1035 that are tax exempt for federal income tax purposes are also tax exempt for PA PIT purposes. Therefore, do not report the gain (loss) on the sale, exchange or disposition of any insurance contracts that include: An exchange of a life insurance contract for another life insurance contract, an endowment contract, or an annuity contract; An exchange of an annuity contract for another annuity contract; An exchange of an endowment contract for an annuity contract; An exchange of one endowment contract for another endowment contract if the dates for payments begin on or before the original contract’s payment dates. If the exchange of contracts has the effect of transferring property to a non-US person, the gain or loss is not tax exempt. If cash or other boot is involved with the exchange of the contracts, the gain or loss is also not tax exempt. The amount of cash or other boot received will be taxable as interest income. For additional information, refer to PA Personal Income Tax Guide - Interest . 7 – Normal Distribution. 7 – Under PA PIT law, a normal distribution is not taxable if an only if – Your pension or retirement plan was an “eligible Pennsylvania retirement plan”; You have met the retirement age or years of service requirement (as applicable) under such plan; and You have retired from service with that employer. If you or your plan does not meet the three requirements above, the taxation of this distribution is determined under the cost recovery method. 8 – Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 20XX. 8– Under PA PIT law, an excess contribution is taxable to the extent there are any earnings on the excess contributions or the employer did not include the contributions in taxable compensation. Otherwise, not taxable. 9– Cost of current life insurance protections (PS 58 costs/premiums paid by a trustee or custodian for current insurance protection, taxable to you currently). 9– Under PA PIT law, PS 58 costs are taxable. A– May be eligible for 10-year tax option. A – Under PA PIT law, there is no provision for 10-year tax options. D– Annuity payments from nonqualified annuities and distributions from life insurance contracts that may be subject to tax under section 1411. D – Under PA PIT law, taxable to the extent distributions exceed contributions as determined using the cost recovery method. E– Distributions under Employee Plans Compliance Resolution System (EPCRS). E– Under PA PIT law, not taxable. F– Charitable gift annuity. F– Under PA PIT law, charitable gift annuities from retirement plans are not taxable to the extent that such amounts are distributed after retirement under the retirement plan. G– Direct rollover and direct payment. G– Under PA PIT law, direct rollovers are not taxable. H– Direct rollover of a designated ROTH account distribution to a ROTH IRA. H– Under PA PIT law, direct rollovers are not taxable. J– Early distribution from a Roth IRA, no known exception (in most cases, under age 59½). Report on federal Forms 1040 and 8606 and refer to federal Form 5329. J – Under PA PIT law, the taxation of a distribution from a Roth IRA prior to reaching 59½ is determined under the cost recovery method. L– Loans treated as distributions L– Under PA PIT law, this distribution is taxable for Pennsylvania purposes if- Your pension or retirement plan was not an eligible plan for PA PIT purposes or You retired before meeting the age conditions of the plan or years of service conditions of the plan. If this distribution is taxable to you under either of the two rules above, then you may use the cost recovery method to determine the taxable portion of this distribution. K – Distribution of traditional IRA assets not having a readily available FMV. K– Under PA PIT law, this distribution is taxable for Pennsylvania purposes if included with Code 1 or 2 when those distributions are taxable. N– Re-characterized IRA contribution made for current tax year (20XX). Report on 20XX federal Form 1040/1040A and federal Form 8606, if applicable. N – Under PA PIT law, not taxable. P– Excess contributions plus earnings/excess deferrals taxable in 20XX P– Under PA PIT law, an excess contribution is taxable if not already taxed by employer. Employee contributions to an eligible retirement plan are always taxable. R– Re-characterized IRA contribution made for previous tax year (20XX). Report on 20XX federal Form 1040/1040A and federal Form 8606, if applicable. R– Under PA PIT law, not taxable. S– Early distribution from a SIMPLE IRA in first 2 years, no known exception (under age 59½). May be subject to an additional 25 percent tax. Refer to federal Form 5329. S– Under PA PIT law, an early distribution from a SIMPLE IRA is taxable under the cost recovery method. T - Roth IRA distribution, exception applies. T - Under PA PIT law, not taxable to the extent you are over 59½. Taxable if under 59½.to the extent using the cost recovery method. U – Dividends distributed from and ESOP under section 404(k). U - Under PA PIT law, taxable. If the stock in the ESOP has not been allocated to the participants, the distribution is taxable as compensation. If the stock in the ESOP has been allocated to the participants, the distribution is taxable as dividend income. W - Charges or payments for purchasing qualified long-term care insurance contracts under combined arrangements. Under PA PIT law, taxable to the extent using the cost recovery method. T– Roth IRA distribution, exception applies. Report on Forms 1040/1040A and 8606. You are either age 59½ or over or an exception (code 2, 3, or 4) applies T– Under PA PIT law a Roth IRA distribution is not taxable if you are at least 59½ so long as the Roth IRA is considered an “eligible retirement plan.” If you are not 59½, the taxation of this distribution is determined under the cost recovery method. If the IRA/SEP/SIMPLE Box is checked, you have received a traditional IRA, SEP, or SIMPLE distribution 8 If you received an annuity contract as part of a distribution, the value of the contract is shown. It is not taxable when you receive it and should not be included in Boxes 1 and 2a. When you receive periodic payments from the annuity contract, they are taxable at that time. If the distribution is made to more than one person, the percentage of the annuity contract distributed to you is also shown. You will need this information if you use the special 10-year tax option (Form 4972). This is a distribution from an insurance policy or annuity purchased for your retirement. Such distributions are not taxable if- Your insurance policy or annuity was an eligible plan for PA PIT purposes, and You retired after meeting the age or years of service conditions of the insurance policy or annuity. If you do not meet these requirements, a distribution may be taxable as a gain on Schedule D, not compensation on Line 1a. Consult you plan administrator as to your cost in the annuity. 9a If a total distribution was made to more than one person, the percentage you received is shown. This box is your percentage of the total distribution listed. 9b For a life annuity from a qualified plan or from a tax-sheltered annuity (with after-tax contributions), an amount may be shown for the employee’s total investment in the contract. It is used to compute the taxable part of the distribution. Refer to Pub. 575. Under PA PIT law, this distribution is taxable for PA purposes if- Your pension or retirement plan was NOT an eligible plan for PA PIT purposes; or You retired before meeting the age conditions of the plan or years of service conditions of the plan. If this distribution is taxable to you under either of the two rules above, then this distribution may be taxable as a gain on Schedule D, not compensation on Line 1a. Consult you plan advisor as to your cost of the annuity. 17 State tax withheld This box lists the amount of withholdings applicable to PA PIT. This amount should be added to any other withholdings and listed on your PA-40, Individual Income Tax Return. A copy of the 1099-R must be included with the return. 15 State/Payer’s state no. Employer identification number or Revenue ID (Box number) of payee. 16 State distribution Not applicable for PA PIT. 19 Local tax withheld Not applicable for PA PIT. 20 Name of locality Not applicable for PA PIT. 18 Local distribution Not applicable for PA PIT.