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Take a
look at some of the most frequently asked questions about the 1099R
form to help you understand the information on this important
document.
If you need help in changing your withholding from your pension
benefits, the ERS can assist you.
However, since the ERS does not provide tax “advice”, we
recommend that you contact your tax consultant or the IRS for
specific information on your tax-related needs.
The
following are common questions regarding the Form 1099-R issued by
the ERS.
For more information on the taxation of pension benefits paid by the
ERS, you may refer to Publication 575, “Pension
and Annuity Income” that is available from the Internal
Revenue Service or the IRS website at http://www.irs.gov/.
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1)
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What’s
a 1099-R form?
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2)
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What
happens if I haven’t received my tax form from the ERS?
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3)
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Why
did I receive more than one copy of Form 1099-R?
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4)
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The
Form 1099-R I received has 2 statements on one sheet of paper.
What should I do with them?
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5)
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So
what does the information on the Form 1099-R tell me?
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6)
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Why
is there a difference between the gross distribution (Box 1) and the
taxable amount (Box 2s) on my tax form?
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7)
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My
1099-R has zeros (“0”s) in
Boxes
1
“Gross Distribution” and 2a “Taxable Amount”.
I know I received pension benefits from the ERS.
Why are the zeros being reported on my Form 1099-R?
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8)
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My
Form 1099-R has zeros (“0”s) in Boxes 1 and 2a. Why is there an
amount in
Box
4
“Federal income tax withheld”?
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9)
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What
is the amount in
Box
5
, "employee contributions / Designated Roth contributions or
insurance premiums" for?
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10)
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My
Form 1099-R doesn’t show anything in
Box
5
. What does this mean?
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11)
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What
is the amount in
Box
9b
?
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12)
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Are
my retirement benefits subject to State of
Hawaii
taxes?
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13)
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I
rolled over my distribution. Do
I still have to report the amount even though the rollover is not
taxable during the current year?
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14)
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The rollover amount on
the 1099-R is greater than what my records show.
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15)
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The 1099-R that I
received is incorrect. How
do I get this corrected?
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16)
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Why was there little or
no taxes withheld from my pension for the year?
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17)
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The actual pension
benefit payments that I received (checks plus direct deposit
amounts) from the ERS
does not equal the total amount reported on the Form 1099-Rs that I
received, even if I subtract the amount of federal income tax
withholdings (Box 1 minus Box 4).
Why are the amounts different?
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| 1) |
What’s a 1099-R
form?
The
form reports the amount of income you received from the ERS during the tax
year, which is information you need to complete your federal and State tax
returns.
1099-R forms are mailed by the end of January each year.
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| 2) |
What
happens if I haven’t received my tax form from the ERS?
We
mailed your tax form to the address we had on record.
If you moved, be sure to contact us with your new address.
Please wait until
mid-February to request a duplicate Form 1099-R to allow the Post Office
time to deliver your mail. If
you haven’t received the Form 1099-R by then, please call our office at
(808) 586-1735 and we will reprint your Form 1099-R and mail it to your
address on file. Allow at
least one week for mail delivery.
Note: If
there was a change in mailing address during the year, please submit a
written statement to update the current mailing address on file.
A "Change in Address" form is available in the
Publications and Forms section of our website or mailed to you upon
request by calling our office. Upon receipt of the written
authorization, a reprint of your Form 1099-R will be issued.
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| 3) |
Why did I receive more
than one copy of Form 1099-R?
You will receive a separate Form 1099-R for (a) the type of payment based
on the IRS Distribution Codes in Box 7 of Form 1099-R (see below for an
explanation of the Distribution Codes) and (b) each type of benefit
payment (such as retiree and beneficiary) subject to income taxes.
a.
For Retirees and Continuing Beneficiaries
The Form 1099-R showing
Distribution Code 2, 3, 4, or 7, in
Box
7
represents your monthly pension benefits paid during the year.
If you retired under Option 4 or 5 of the Contributory Plan or
Hybrid Plan, the amount not rolled over to another qualified retirement
plan may also be included in these totals (such as the nontaxable portion
of your Option 4 or 5 refund).
The Form 1099-R, with a Distribution
Code G in
Box
7
, represents amounts that you elected to roll over to another qualified
retirement account, such as an Individual Retirement Account (IRA).
The ERS transferred these funds directly to the financial
institution as directed by you.
If you received a third Form 1099-R
with a Distribution Code 1 in Box 7, this includes the portion that
represents a premature distribution for members who separated from service
before age 55** and received a refund of contributions (usually as part of
their Option 4 or 5 payment or for terminated members that withdrew their
contributions). This amount
reflects the taxable portion of the lump-sum refund payment that was not
rolled over directly from the ERS. Amounts reported with a
Distribution Code 1 may be subject to a 10% additional tax for early
distributions.
**
Note: The 10%
additional tax on early distributions under Internal Revenue Code §
72(t)(1) does not apply to qualified public safety employee who receive
the distribution after
August 17, 2006
and have separated from service after attainment of age 50 (per the
Pension Protection Act of 2006). For
purposes of § 72(t)(10), the term “qualified public safety employee”
means an employee of a State or of a political subdivision of a State
(such as a county or city) whose principal duties include services
requiring specialized training in the area of police protection,
firefighting services, or emergency medical services.
b.
For Former Members
The
same distribution codes, discussed above for Retirees and Continuing
Beneficiaries apply to former members that elected to withdraw their
contributions and received a refund from the ERS, (see below for an
explanation of the Distribution Codes).
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| 4) |
The Form 1099-R I
received has 2 statements on one sheet of paper.
What should I do with them?
The top half of Form 1099-R (Copy C) provided by the ERS is to be retained
for your records. The bottom portion of Form 1099-R (Copy B) should be
detached and submitted with your tax return to the IRS if there is an
amount in
Box
4
for “income taxes withheld.”
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| 5) |
So what does the
information on the Form 1099-R tell me?
Each box has specific
information you will need to complete your tax return.
The boxes below are the ones that relate to your benefits from the
ERS.
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Box
1
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This is the total
dollar amount of benefits you received before any deductions were
taken.
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Box
2a
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This shows the
amount of your benefits that are taxable, or what you need to report
on ERS income on your tax return.
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Box
2b
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Taxable amount not
determined
A “Not
Determined” taxability indicator is present if your benefit
payment started before
July 1, 1986
.
If
Box
2b
is checked
Box
2a
will contain
asterisks (“********”)
Total Distribution
An “X”
indicates the recipient received the entire amount of the benefit as
a lump sum or the final payment for death benefits.
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Box
3
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This amount
represents the portion of a taxable death benefit lump sum
distribution or refund that is subject to capital gains treatment.
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Box
4
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This is the amount
of federal income tax withholding that was deducted.
Use this amount on your federal income tax return.
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Box
5
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This is the amount
of after-tax contributions that the IRS allows you to receive as tax
free for the year.
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Box
7
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This code indicates
the type of benefit being reported to IRS.
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Dist Code
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Remarks
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1
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Early
Distribution, no known exception – Distribution subject to
IRS 10% early distribution tax (See IRS form 5329 for more
information). This
code is used for individuals under age 55**. For the ERS,
these are the refund option amounts for withdrawals of a
member/pensioner who was under age 55** in the year of
retirement / termination and the amounts were not rolled over
to an Individual Retirement Account or other qualified
retirement account.
**
Under age 50 for qualified public safety officers (whose
principal duties include services requiring specialized
training in the area of police protection, firefighting
services, or emergency medical services).
These amounts
may be subject to the 10% additional tax for withdrawals.
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2
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Early
Distribution, exception applies (under age 59-1/2) –
Benefits received before age 59 ½ and are exempt from the
Early Distribution Tax under IRC section 72(t). For the ERS,
these are the refund options for withdrawals of a
member/pensioner who was age 55 (age 50 for qualified public
safety officers) or older in the year of
retirement/termination or for members who received annuity
payments for life.
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3
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Disability
– Benefits paid under service-connected or ordinary
disability retirements.
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4
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Death –
Death benefit payments to a beneficiary or estate.
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7
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Normal
Distribution – For distributions after age 59-1/2.
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A
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May be
eligible for 10-year tax method.
(Only eligible in combination with Distribution Codes 4
and 7.)
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G
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Direct
Rollover – Portion of refund that is transferred by the ERS
directly to another qualified retirement account or an IRA.
(Only eligible in combination with Distribution Codes 4 and
7.)
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Box
9b
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This is the total
amount of after-tax contributions you made while an active member
that you will be able to receive as nontaxable during your
retirement.
This amount is only
reported in your first year of retirement and is for information
only.
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| 6) |
Why is there a
difference between the gross distribution (Box 1) and the taxable amount
(Box 2s) on my tax form?
If
Box
1
and
Box
2a
are different, either:
- There
is an amount present in
Box
5
, which is non-taxable.
or
- The
form represents the amount rolled over to a qualified retirement plan,
and the IRS Distribution Code in
Box
7
is G.
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| 7) |
My 1099-R has zeros
(“0”s) in
Boxes
1
“Gross Distribution” and 2a “Taxable Amount”.
I know I received pension benefits from the ERS.
Why are the zeros being reported on my Form 1099-R?
If you are receiving
service-connected disability or death payments, part or all of your
service connected disability payments may be considered to be payments in
the nature of worker’s compensation and are not included in gross income
for Federal and State of
Hawaii
income tax purposes. The
portion of benefits that qualify for this exclusion are not reported in
the Form 1099-R amounts.
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| 8) |
My Form 1099-R has
zeros (“0”s) in Boxes 1 and 2a. Why is there an amount in
Box
4
“Federal income tax withheld”?
If you retired under a
service connected disability retirement in certain situations, part or all
of your pension may be excluded from gross income since it is qualified as
workers compensation type of payments.
The amount in
Box
4
represents the amount you had withheld from benefit payments for federal
income taxes.
You may change this withholding by
sending a written authorization to the ERS.
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| 9) |
What is the amount in
Box
5
, "employee contributions / Designated Roth contributions or
insurance premiums" for?
Box
5
contains the amount of your pension benefits that you received during the
year that are non-taxable.
This
amount represents the recovery of your after-tax contributions
(“costs”) you made to the ERS while you were an employee of the State
or county and is calculated according to rules required by the Internal
Revenue Code.
For
members that retired after 1988, your monthly tax-free amount can be found
on Copy C of Form 1099-R, located in the lower left corner, under
“Monthly exempt amt”.
The
label for
Box
5
is determined by the IRS, and the
Box
5
amount as reported by the ERS does not represent any type of premium(s)
paid.
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| 10) |
My Form 1099-R
doesn’t show anything in
Box
5
. What does this mean?
If
Box
5
is blank, either:
- The
contributions that were deducted during employment were paid before
taxes – “pre-tax” contributions.
Since no federal taxes were paid on them at that time, your
benefit is fully taxable for federal income tax purposes.
or
- You,
or the member you are receiving a benefit from, retired under the
Noncontributory Plan and did not pay any contributions while working.
or
- You
have already used up the total previously taxed contributions in prior
tax years. Your retirement
benefits are now “fully taxable”.
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| 11) |
What is the amount in
Box
9b
?
This amount represents your after-tax contributions (pre-1987
contributions, 1987 contributions, lump sum payments and pre-1999 payroll
deduction payments to purchase service credits) you made to the ERS that
will be recovered tax-free over the lifetime of the retiree, and
beneficiary if a survivor option was selected.
The amount in
Box
9b
is only reported in the year monthly payments begin and is for IRS
information only.
Note:
Your after-tax contributions and total contributions recovered
(since your retirement) are provided each year in the “For Info”
section of Copy C of Form 1099-R.
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| 12) |
Are my retirement
benefits subject to State of
Hawaii
taxes?
No.
For State of
Hawaii
income tax purposes, retirement benefits from the ERS are not taxable.
In the event that a member or beneficiary moves to a different
state, the ERS strongly recommends that the member confer with his or her
accountant or tax consultant to determine the state and local tax
treatment of any distribution.
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| 13) |
I rolled over my
distribution. Do I still have
to report the amount even though the rollover is not taxable during the
current year?
Yes.
The Form 1099-R with distribution code G represents the amount of
your rollover. The amounts
must be reported on your individual income tax return. As
your Form 1099-R shows “-$0-“ taxable amount, the amount you rolled
over will not be subject to taxes until it is disbursed from your IRA or
qualified plan.
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| 14) |
The rollover amount on
the 1099-R is greater than what my records show.
If your pension was
finalized during the year, an additional amount may have been rolled over
to your IRA account. Please
check with your financial institution to confirm the total amount rolled
over. If you are certain this
is not the case, please notify the ERS to research.
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| 15) |
The 1099-R that I
received is incorrect. How do
I get this corrected?
Please provide your full
name, social security number, current address, daytime phone number and
the reason you believe there is a discrepancy.
If you are a beneficiary, also provide the name and social security
of the deceased member that the benefit payments are based on.
Forward this information to the ERS. We will research the
issue and provide a resolution as soon as possible.
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| 16) |
Why was there little
or no taxes withheld from my pension for the year?
The amount withheld for
federal income taxes from your pension payments is based on your
instructions received by the ERS. If
you instructed us to use the IRS tax withholding tables to calculate the
amount withheld, and your pension benefit is less than the minimum amount
required to have taxes withheld per the IRS' Tax Withholding Table, then
little or no taxes were withheld during the year.
Note:
If you want to change the amount of taxes withheld, please send a
written request with your signature stating your name, social security
number, and the amount to deduct from each pension payment or complete
Form W-4P, Withholding Certificate for Pension or Annuity Payments, or ERS
Form Acctg 26, Federal Tax Withholding Changes.
ERS Form Acctg 26 is available under the Publications and Forms
section of our website or you may call our office to have the tax
withholding form mailed to you. Form
W-4P can be obtained from the IRS or downloaded from the IRS website.
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| 17) |
The actual pension
benefit payments that I received (checks plus direct deposit amounts)
from the ERS does not equal the total amount reported on the Form
1099-Rs that I received, even if I subtract the amount of federal income
tax withholdings (Box 1 minus Box 4).
Why are the amounts different?
The amounts will be
different if there were any other deductions from your pension payments
during the year. These
deductions (such as union deductions, child support payments or federal
income tax levies) are not reported on the Form 1099-R.
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