Simplified Method Worksheet—Lines 5a and 5b

Simplified Method Worksheet-Lines 5a and 5b

Simplified Method Worksheet—Lines 5a and 5b

Summary: This is the simplified method worksheet. It is used to figure the taxable part of your pension or annuity using the simplified method.

Before you begin: If you are the beneficiary of a deceased employee or former employee who died before August 21, 1996, include any death benefit exclusion that you are entitled to (up to $5,000) in the amount entered on line 2 below.

Before you begin: More than one pension or annuity. If you had more than one partially taxable pension or annuity, figure the taxable part of each separately. Enter the total of the taxable parts on Form 1040 or 1040-SR, line 5b. Enter the total pension or annuity payments received in 2025 on Form 1040 or 1040-SR, line 5a.

The line items to be completed are:

"1. Enter the total pension or annuity payments from Form 1099-R, box 1. Also, enter this amount on Form 1040 or 1040-SR, line 5a." field "2. Enter your cost in the plan at the annuity starting date. Note. If you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year’s worksheet on line 4 below (even if the amount of your pension or annuity has changed). Otherwise, go to line 3." field "3. Enter the appropriate number from Table 1 below. But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below." field "4. Divide line 2 by the number on line 3." field "5. Multiply line 4 by the number of months for which this year’s payments were made. If your annuity starting date was before 1987, skip lines 6 and 7 and enter this amount on line 8. Otherwise, go to line 6." field "6. Enter the amount, if any, recovered tax free in years after 1986. If you completed this worksheet last year, enter the amount from line 10 of last year’s worksheet." field "7. Subtract line 6 from line 2." field "8. Enter the smaller of line 5 or line 7." field "9. Taxable amount. Subtract line 8 from line 1. Enter the result, but not less than zero. Also, enter this amount on Form 1040 or 1040-SR, line 5b. If your Form 1099-R shows a larger amount, use the amount on this line instead of the amount from Form 1099-R. If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers before entering an amount on line 5b." field "10. Was your annuity starting date before 1987?" "Yes. STOP. Do not complete the rest of this worksheet."checkbox, field "No. Add lines 6 and 8. This is the amount you have recovered tax free through 2025. You will need this number if you need to fill out this worksheet next year." checkbox, field "11. Balance of cost to be recovered. Subtract line 10 from line 2. If zero, you won’t have to complete this worksheet next year. The payments you receive next year will generally be fully taxable."field

Table 1 for Line 3 Above

IF the age at annuity starting date was AND your annuity starting date was before November 19, 1996, enter on line 3 AND your annuity starting date was after November 18, 1996, enter on line 3 55 or under 300 360 56–60 260 310 61–65 240 260 66–70 170 210 71 or older 120 160

Table 2 for Line 3 Above

IF the combined ages at annuity starting date were THEN enter on line 3 110 or under 410 111–120 360 121–130 310 131–140 260 141 or older 210

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If you are retired on disability and reporting your disability pension on line 1h, include only the taxable amount on that line and enter “PSO” and the amount excluded on the line next to line 1h.

Payments when you are disabled.

If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat those payments as disability payments. The payments must be reported as a pension or annuity.

You must include in your income any amounts that you received that you would have received in retirement had you not become disabled as a result of a terrorist attack. Include in your income any payments you receive from a 401(k), pension, or other retirement plan to the extent that you would have received the amount at the same or later time regardless of whether you had become disabled.

Example.

You were a contractor who was disabled as a direct result of participating in efforts to clean up the World Trade Center and you are eligible for compensation by the September 11 Victim Compensation Fund. You began receiving a disability pension at age 55 when you could no longer work due to your disability. Under your pension plan, you are entitled to an early retirement benefit of $2,500 a month at age 55. If you wait until age 62, the normal retirement age under the plan, you would be entitled to a normal retirement benefit of $3,000 a month. The pension plan provides that a participant who retires early on account of disability is entitled to receive the participant’s normal retirement benefit, which in your case equals $3,000 a month. Until you turn age 62, you can exclude $500 of your monthly retirement benefit from income (the difference between the early retirement benefit and the normal retirement benefit, $3,000 − $2,500) received on account of disability. You must report the remaining $2,500 of monthly pension benefit as taxable. For each month after you turn age 62, you must report the full amount of the monthly pension benefit ($3,000 a month) as taxable.