Department of the Treasury

Internal Revenue Service

Publication 575

Cat. No. 15142B

Pension and 

Annuity 

Income

For use in preparing

2023 Returns

Get forms and other information faster and easier at:

• IRS.gov (English) 

• IRS.gov/Spanish (Español) 

• IRS.gov/Chinese (中文) 

• IRS.gov/Korean (한국어) 

• IRS.gov/Russian (Pусский) 

• IRS.gov/Vietnamese (Tiếng Việt) 

Contents

Future Developments ....................... 1

What’s New ............................... 2

Reminders ............................... 2

Introduction .............................. 2

General Information ........................ 4

Variable Annuities ........................ 5

Section 457 Deferred Compensation Plans ...... 5

Disability Pensions ....................... 6

Insurance Premiums for Retired Public Safety 

Officers ............................. 6

Railroad Retirement Benefits ................ 6

Withholding Tax and Estimated Tax ........... 9

Cost (Investment in the Contract) ............ 10

Taxation of Periodic Payments ............... 11

Fully Taxable Payments ................... 12

Partly Taxable Payments .................. 12

Taxation of Nonperiodic Payments ............ 14

Figuring the Taxable Amount ............... 16

Loans Treated as Distributions .............. 18

Transfers of Annuity Contracts .............. 19

Lump-Sum Distributions .................. 20

Rollovers ............................... 28

Special Additional Taxes ................... 33

Tax on Early Distributions ................. 33

Tax on Excess Accumulation ............... 37

Survivors and Beneficiaries ................. 38

Disaster-Related Relief ..................... 39

Qualified Disaster Recovery Distributions ...... 40

Taxation of Qualified Disaster Distributions ..... 41

Repayment of Qualified Disaster Distributions ... 41

Recontribution of Qualified Distributions for 

the Purchase or Construction of a Main 

Home ............................. 42

Loans From Qualified Plans ................ 42

How To Get Tax Help ....................... 44

Worksheet A. Simplified Method ............. 49

Recapture Allocation Chart ................. 50

Index .................................. 51

Future Developments

For the latest information about developments related to 

Pub. 575, such as legislation enacted after it was 

published, go to IRS.gov/Pub575.

Mar 7, 2024
What’s New

Distributions to victims of domestic abuse. For tax 

years beginning after December 31, 2023, a distribution to 

a domestic abuse victim is not subject to the 10% additional tax on early distributions if the distribution is made 

from an applicable eligible retirement plan and made to an 

individual during the 1-year period beginning on the date 

on which the individual is a victim of domestic abuse by a 

spouse or domestic partner.

An eligible distribution to a domestic abuse victim must 

not exceed the lesser of $10,000 or 50% of the present 

value of the nonforfeitable accrued benefit of the employee under the plan.

The distribution may be repaid at any time during the 

3-year period beginning on the day after the date on which 

the distribution was received.

Reminders

The direct payment requirement for certain distributions for payment of health or long-term care insurance repealed. Distributions from governmental plans to 

an eligible retired public safety officer made after December 29, 2022, for health and long-term care insurance can 

be excluded from that employee’s gross income.

These distributions are excluded from gross income 

whether the premiums are paid directly to the provider of 

the accident or health plan or qualified long-term care insurance contract by deduction from a distribution from the 

eligible retirement plan or if the distributions are made to 

the employee.

The amount which may be excluded from gross income 

for the tax year can’t exceed the lesser of $3,000 or the 

amount paid for the insurance.

Form 8915-F replaces Form 8915-E. Form 8915-F, 

Qualified Disaster Retirement Plan Distributions and Repayments, replaces Form 8915-E for reporting qualified 

2020 disaster distributions and repayments of those distributions made in 2021, 2022, and 2023, as applicable. In 

previous years, distributions and repayments would be reported on the applicable Form 8915 for that year's disasters. For example, Form 8915-D, Qualified 2019 Disaster 

Retirement Plan Distributions and Repayments, would be 

used to report qualified 2019 disaster distributions and repayments.

Form 8915-F is a forever form. Beginning in 2021, additional alphabetical Forms 8915 will not be issued. For 

more information, see the Instructions for Form 8915-F.

Photographs of missing children. The IRS is a proud 

partner with the National Center for Missing & Exploited 

Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring 

these children home by looking at the photographs and 

calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

This publication discusses the tax treatment of distributions you receive from pension and annuity plans and also 

shows you how to report the income on your federal income tax return. How these distributions are taxed depends on whether they are periodic payments (amounts 

received as an annuity) that are paid at regular intervals 

over several years or nonperiodic payments (amounts not 

received as an annuity).

What is covered in this publication? This publication 

contains information that you need to understand the following topics.

• How to figure the tax-free part of periodic payments 

under a pension or annuity plan, including using a 

simple worksheet for payments under a qualified plan.

• How to figure the tax-free part of nonperiodic payments from qualified and nonqualified plans, and how 

to use the optional methods to figure the tax on 

lump-sum distributions from pension, stock bonus, 

and profit-sharing plans.

• How to roll over certain distributions from a retirement 

plan into another retirement plan or IRA.

• How to report disability payments, and how beneficiaries and survivors of employees and retirees must report benefits paid to them.

• How to report railroad retirement benefits.

• When additional taxes on certain distributions may apply (including the tax on early distributions and the tax 

on excess accumulation).

For additional information on how to report pension or annuity payments on your federal income 

tax return, be sure to review the instructions on 

the back of Copies B, C, and 2 of the Form 1099-R, Distributions From Pensions, Annuities, Retirement or 

Profit-Sharing Plans, IRAs, Insurance Contracts, etc., that 

you received and the instructions for Form 1040, lines 5a 

and 5b, and the instructions for Form 1040-NR, lines 5a 

and 5b.

A “corrected” Form 1099-R replaces the corresponding original Form 1099-R if the original 

Form 1099-R contained an error. Make sure you 

use the amounts shown on the corrected Form 1099-R 

when reporting information on your tax return.

What isn't covered in this publication? The following 

topics aren't discussed in this publication.

The General Rule. This is the method generally used 

to determine the tax treatment of pension and annuity income from nonqualified plans (including commercial annuities). For a qualified plan, you can’t generally use the 

General Rule unless your annuity starting date is before 

November 19, 1996. Although this publication will help 

you determine whether you can use the General Rule, it 

won't help you use it to determine the tax treatment of your 

TIP

CAUTION

!

2 Publication 575 (2023)
pension or annuity income. For that and other information 

on the General Rule, see Pub. 939, General Rule for Pensions and Annuities.

Individual retirement arrangements (IRAs). Information on the tax treatment of amounts you receive from 

an IRA is in Pub. 590-B.

Civil service retirement benefits. If you are retired 

from the federal government (regular, phased, or disability 

retirement) or are the survivor or beneficiary of a federal 

employee or retiree who died, see Pub. 721, Tax Guide to 

U.S. Civil Service Retirement Benefits. Pub. 721 covers 

the tax treatment of federal retirement benefits, primarily 

those paid under the Civil Service Retirement System 

(CSRS) or the Federal Employees' Retirement System 

(FERS). It also covers benefits paid from the Thrift Savings Plan (TSP).

Social security and equivalent tier 1 railroad retirement benefits. For information about the tax treatment of 

these benefits, see Pub. 915, Social Security and Equivalent Railroad Retirement Benefits. However, this publication (575) covers the tax treatment of the non-social security equivalent benefit portion of tier 1 railroad retirement 

benefits, tier 2 benefits, vested dual benefits, and supplemental annuity benefits paid by the U.S. Railroad Retirement Board.

Tax-sheltered annuity plans (403(b) plans). If you 

work for a public school or certain tax-exempt organizations, you may be eligible to participate in a 403(b) retirement plan offered by your employer. Although this publication covers the treatment of benefits under 403(b) plans 

and discusses in-plan Roth rollovers from 403(b) plans to 

designated Roth accounts, it doesn't cover other tax provisions that apply to these plans. For that and other information on 403(b) plans, see Pub. 571.

Comments and suggestions. We welcome your comments about this publication and suggestions for future 

editions.

You can send us comments through IRS.gov/

FormComments. Or, you can write to the Internal Revenue 

Service, Tax Forms and Publications, 1111 Constitution 

Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will 

consider your comments and suggestions as we revise 

our tax forms, instructions, and publications. Don’t send 

tax questions, tax returns, or payments to the above address.

Getting answers to your tax questions. If you have 

a tax question not answered by this publication or the How 

To Get Tax Help section near the end of this publication, 

go to the IRS Interactive Tax Assistant page at IRS.gov/

Help/ITA where you can find topics by using the search 

feature or viewing the categories listed.

Getting tax forms, instructions, and publications. 

Go to IRS.gov/Forms to download current and prior-year 

forms, instructions, and publications.

Ordering tax forms, instructions, and publications. 

Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order 

prior-year forms and instructions. The IRS will process 

your order for forms and publications as soon as possible. 

Don’t resubmit requests you’ve already sent us. You can 

get forms and publications faster online.

Useful Items

You may want to see:

Publication

Tax Withholding and Estimated Tax

Credit for the Elderly or the Disabled

Taxable and Nontaxable Income

Retirement Plans for Small Business (SEP, 

SIMPLE, and Qualified Plans)

Tax-Sheltered Annuity Plans (403(b) Plans)

Contributions to Individual Retirement 

Arrangements (IRAs)

Distributions from Individual Retirement 

Arrangements (IRAs)

Tax Guide to U.S. Civil Service Retirement 

Benefits

Tax Highlights for Persons With Disabilities

Social Security and Equivalent Railroad 

Retirement Benefits

General Rule for Pensions and Annuities

Disaster Relief

Form (and Instructions)

ithholding Certificate for Pension or Annuity 

Payments

ithholding Certificate for Nonperiodic 

Payments and Eligible Rollover Distributions

1099-R Distributions From Pensions, Annuities, 

Retirement or Profit-Sharing Plans, IRAs, 

Insurance Contracts, etc.

4972 Tax on Lump-Sum Distributions

329 Additional Taxes on Qualified Plans (Including 

IRAs) and Other Tax-Favored Accounts

891-C Qualified 2018 Disaster Retirement Plan 

Distributions and Repayments

8915-D Qualified 2019 Disaster Retirement Plan 

Distributions and Repayments

8915-F Qualified Disaster Retirement Plan 

Distributions and Repayments

See How To Get Tax Help near the end of this publication 

for information about getting publications and forms.

 505

 524

 525

 560

 571

 590-A

 590-B

 721

 907

 915

 939

 976

 W-4P

 W-4R

 1099-R

 4972

 5329

 8915-C

 8915-D

 8915-F

Publication 575 (2023) 3
General Information

Definitions. Some of the terms used in this publication 

are defined in the following paragraphs.

Pension. A pension is generally a series of definitely 

determinable payments made to you after you retire from 

work. Pension payments are made regularly and are 

based on such factors as years of service and prior compensation.

Annuity. An annuity is a series of payments under a 

contract made at regular intervals over a period of more 

than 1 full year. They can be either fixed (under which you 

receive a definite amount) or variable (not fixed). You can 

buy the contract alone or with the help of your employer.

Qualified employee plan. A qualified employee plan 

is an employer's stock bonus, pension, or profit-sharing 

plan that is for the exclusive benefit of employees or their 

beneficiaries and that meets Internal Revenue Code requirements. It qualifies for special tax benefits, such as tax 

deferral for employer contributions and capital gain treatment or the 10-year tax option for lump-sum distributions 

(if participants qualify). To determine whether your plan is 

a qualified plan, check with your employer or the plan administrator.

Qualified employee annuity. A qualified employee 

annuity is a retirement annuity purchased by an employer 

for an employee under a plan that meets Internal Revenue 

Code requirements.

Designated Roth account. A designated Roth account is a separate account created under a qualified 

Roth contribution program to which participants may elect 

to have part or all of their elective deferrals to a 401(k), 

403(b), or 457(b) plan designated as Roth contributions. 

In addition, a designated Roth account may include certain nonelective contributions or matching contributions 

that a participant designates as Roth contributions.

Designated Roth contributions, designated Roth nonelective contributions, and designated Roth matching contributions are included in your income. However, qualified 

distributions (explained later) aren't included in your income.

You should check with your plan administrator to determine if your plan will accept designated Roth contributions.

Tax-sheltered annuity plan. A tax-sheltered annuity 

plan (often referred to as a “403(b) plan” or a “tax-deferred 

annuity plan)” is a retirement plan for employees of public 

schools and certain tax-exempt organizations. Generally, 

a tax-sheltered annuity plan provides retirement benefits 

by purchasing annuity contracts for its participants.

Types of pensions and annuities. Pensions and annuities include the following types.

Fixed-period annuities. You receive definite 

amounts at regular intervals for a specified length of time.

Annuities for a single life. You receive definite 

amounts at regular intervals for life. The payments end at 

death.

Joint and survivor annuities. The first annuitant receives a definite amount at regular intervals for life. After 

they die, a second annuitant receives a definite amount at 

regular intervals for life. The amount paid to the second 

annuitant may or may not differ from the amount paid to 

the first annuitant.

Variable annuities. You receive payments that may 

vary in amount for a specified length of time or for life. The 

amounts you receive may depend upon such variables as 

profits earned by the pension or annuity funds, cost-of-living indexes, or earnings from a mutual fund.

Disability pensions. You receive disability payments 

because you retired on disability and haven't reached minimum retirement age.

More than one program. You may receive employee 

plan benefits from more than one program under a single 

trust or plan of your employer. If you participate in more 

than one program, you may have to treat each as a separate pension or annuity contract, depending upon the facts 

in each case. Also, you may be considered to have received more than one pension or annuity. Your former employer or the plan administrator should be able to tell you if 

you have more than one contract.

Example. Your employer set up a noncontributory 

profit-sharing plan for its employees. The plan provides 

that the amount held in the account of each participant will 

be paid when that participant retires. Your employer also 

set up a contributory defined benefit pension plan for its 

employees providing for the payment of a lifetime pension 

to each participant after retirement.

The amount of any distribution from the profit-sharing 

plan depends on the contributions (including allocated forfeitures) made for the participant and the earnings from 

those contributions. Under the pension plan, however, a 

formula determines the amount of the pension benefits. 

The amount of contributions is the amount necessary to 

provide that pension.

Each plan is a separate program and a separate contract. If you get benefits from these plans, you must account for each separately, even though the benefits from 

both may be included in the same check.

Distributions from a designated Roth account are 

treated separately from other distributions from 

the plan.

Qualified domestic relations order (QDRO). A QDRO 

is a judgment, decree, or order relating to payment of child 

support, alimony, or marital property rights to a spouse, 

former spouse, child, or other dependent of a participant 

in a retirement plan. The QDRO must contain certain specific information, such as the name and last known mailing 

address of the participant and each alternate payee, and 

the amount or percentage of the participant's benefits to 

be paid to each alternate payee. A QDRO may not award 

CAUTION

!

4 Publication 575 (2023)
an amount or form of benefit that isn't available under the 

plan.

A spouse or former spouse who receives part of the 

benefits from a retirement plan under a QDRO reports the 

payments received as if they were a plan participant. The 

spouse or former spouse is allocated a share of the participant's cost (investment in the contract) equal to the cost 

times a fraction. The numerator of the fraction is the 

present value of the benefits payable to the spouse or former spouse. The denominator is the present value of all 

benefits payable to the participant.

A distribution that is paid to a child or other dependent 

under a QDRO is taxed to the plan participant.

Variable Annuities

The tax rules in this publication apply both to annuities 

that provide fixed payments and to annuities that provide 

payments that vary in amount based on investment results 

or other factors. For example, they apply to commercial 

variable annuity contracts, whether bought by an employee retirement plan for its participants or bought directly from the issuer by an individual investor. Under 

these contracts, the owner can generally allocate the purchase payments among several types of investment portfolios or mutual funds and the contract value is determined 

by the performance of those investments. The earnings 

aren't taxed until distributed either in a withdrawal or in annuity payments. The taxable part of a distribution is treated as ordinary income.

For information on the tax treatment of a transfer or exchange of a variable annuity contract, see Transfers of Annuity Contracts under Taxation of Nonperiodic Payments, 

later.

Net Investment Income Tax (NIIT). Annuities under a 

nonqualified plan are included in calculating your net investment income for the NIIT. See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its 

instructions for more information.

Withdrawals. If you withdraw funds before your annuity 

starting date and your annuity is under a qualified retirement plan, a ratable part of the amount withdrawn is tax 

free. The tax-free part is based on the ratio of your cost 

(investment in the contract) to your account balance under 

the plan.

If your annuity is under a nonqualified plan (including a 

contract you bought directly from the issuer), the amount 

withdrawn is allocated first to earnings (the taxable part) 

and then to your cost (the tax-free part). However, if you 

bought your annuity contract before August 14, 1982, a 

different allocation applies to the investment before that 

date and the earnings on that investment. To the extent 

the amount withdrawn doesn't exceed that investment and 

earnings, it is allocated first to your cost (the tax-free part) 

and then to earnings (the taxable part).

If you withdraw funds (other than as an annuity) on or 

after your annuity starting date, the entire amount withdrawn is generally taxable.

The amount you receive in a full surrender of your annuity contract at any time is tax free to the extent of any 

cost that you haven't previously recovered tax free. The 

rest is taxable.

For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments, later. If you 

withdraw funds from your annuity before you reach age 

591/2, also see Tax on Early Distributions under Special 

Additional Taxes, later.

Annuity payments. If you receive annuity payments under a variable annuity plan or contract, you recover your 

cost tax free under either the Simplified Method or the 

General Rule, as explained under Taxation of Periodic 

Payments, later. For a variable annuity paid under a qualified plan, you must generally use the Simplified Method. 

For a variable annuity paid under a nonqualified plan (including a contract you bought directly from the issuer), you 

must use a special computation under the General Rule. 

For more information, see Variable annuities under Computation Under the General Rule in Pub. 939.

Death benefits. If you receive a single-sum distribution 

from a variable annuity contract because of the death of 

the owner or annuitant, the distribution is generally taxable 

only to the extent it is more than the unrecovered cost of 

the contract. If you choose to receive an annuity, the payments are subject to tax as described above. If the contract provides a joint and survivor annuity and the primary 

annuitant had received annuity payments before death, 

you figure the tax-free part of annuity payments you receive as the survivor in the same way the primary annuitant did. See Survivors and Beneficiaries, later.

Section 457 Deferred Compensation 

Plans

If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. If your plan is an eligible plan, you aren't taxed currently on pay that is 

deferred under the plan or on any earnings from the plan's 

investment of the deferred pay. You are generally taxed on 

amounts deferred in an eligible state or local government 

plan only when they are distributed from the plan. You are 

taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise 

made available to you.

Your 457(b) plan may have a designated Roth account 

option. If so, you may be able to roll over amounts to the 

designated Roth account or make contributions. Contributions to a designated Roth account are included in your income. Qualified distributions (explained later) aren't included in your income. See Designated Roth accounts under 

Taxation of Periodic Payments, later.

This publication covers the tax treatment of benefits under eligible section 457 plans, but it doesn't cover the 

treatment of deferrals. For information on deferrals under 

section 457 plans, see Retirement Plan Contributions under Employee Compensation in Pub. 525.

Publication 575 (2023) 5
Is your plan eligible? To find out if your plan is an eligible plan, check with your employer. Plans that aren’t eligible section 457 plans include the following.

• Bona fide vacation leave, sick leave, compensatory 

time, severance pay, disability pay, or death benefit 

plans.

• Nonelective deferred compensation plans for nonemployees (independent contractors).

• Deferred compensation plans maintained by 

churches.

• Length of service award plans for bona fide volunteer 

firefighters and emergency medical personnel. An exception applies if the total amount paid to a volunteer 

exceeds $7,000 for any year of service.

Disability Pensions

If you retired on disability, you must generally include in income any disability pension you receive under a plan that 

is paid for by your employer. You must report your taxable 

disability payments as wages on Form 1040, 1040-SR, or 

1040-NR, line 1h, until you reach minimum retirement age. 

Minimum retirement age is generally the age at which you 

can first receive a pension or annuity if you aren't disabled.

You may be entitled to a tax credit if you were permanently and totally disabled when you retired. 

For information on this credit, see Pub. 524.

Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension 

or annuity. When you receive pension or annuity payments, you are able to recover your cost or investment. 

Your cost is generally your net investment in the plan as of 

your annuity starting date. It doesn't include pre-tax contributions. For more information, see Cost (Investment in the 

Contract) and Taxation of Periodic Payments, later.

Report the payments on Form 1040, 1040-SR, or 

1040-NR, lines 5a and 5b.

Disability payments for injuries incurred as a direct result of a terrorist attack directed against the 

United States (or its allies) aren't included in income. For more information about payments to survivors 

of terrorist attacks, see Pub. 3920, Tax Relief for Victims of 

Terrorist Attacks, and Pub. 907.

Military and government disability pensions. Certain 

military and government disability pensions aren’t taxable.

Service-connected disability. You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness 

resulting from active service in one of the following government services.

• The armed forces of any country.

• The National Oceanic and Atmospheric Administration.

• The Public Health Service.

TIP TIP

• The Foreign Service.

Insurance Premiums for Retired 

Public Safety Officers

If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew who is retired because of 

disability or because you reached normal retirement age), 

you can elect to exclude from income distributions made 

from your eligible retirement plan that are used to pay the 

premiums for coverage by an accident or health plan or a 

long-term care insurance contract. The premiums can be 

for coverage for you, your spouse, or dependents.

The distribution must be from the plan maintained by 

the employer from which you retired as a public safety officer. The distribution can be made directly from the plan to 

the provider of the accident or health plan or long-term 

care insurance contract, or the distribution can be made to 

you to pay to the provider of the accident or health plan or 

long-term care insurance contract.

You can exclude from income the smaller of the amount 

of the insurance premiums or $3,000. You can make this 

election only for amounts that would otherwise be included in your income. The amount excluded from your income can't be used to claim a medical expense deduction.

An eligible retirement plan is a governmental plan that 

is a:

• Qualified trust,

• Section 403(a) plan,

• Section 403(b) annuity, or

• Section 457(b) plan.

If you make this election, reduce the otherwise taxable 

amount of your pension or annuity by the amount excluded. The amount shown in box 2a of Form 1099-R doesn't 

reflect this exclusion. Report your total distributions on 

Form 1040, 1040-SR, or 1040-NR, line 5a. Report the taxable amount on Form 1040, 1040-SR, or 1040-NR, 

line 5b. Enter “PSO” next to the appropriate line on which 

you report the taxable amount.

If you are retired on disability and reporting your disability pension on Form 1040, 1040-SR, or 1040-NR, line 1h, 

include only the taxable amount on that line and enter 

“PSO” and the amount excluded on the dotted line next to 

the applicable line.

Railroad Retirement Benefits

Benefits paid under the Railroad Retirement Act fall into 

two categories. These categories are treated differently for 

income tax purposes.

The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a 

railroad employee or beneficiary would have been entitled 

to receive under the social security system. This part of 

6 Publication 575 (2023)
the tier 1 benefit is the social security equivalent benefit 

(SSEB) and you treat it for tax purposes as social security 

benefits. If you received, repaid, or had tax withheld from 

the SSEB portion of tier 1 benefits during 2023, you will receive Form RRB-1099, Payments by the Railroad Retirement Board (or Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad 

Retirement Board, if you are a nonresident alien) from the 

U.S. Railroad Retirement Board (RRB).

For more information about the tax treatment of the 

SSEB portion of tier 1 benefits and Forms RRB-1099 and 

RRB-1042S, see Pub. 915.

The second category contains the rest of the tier 1 railroad retirement benefits called the non-social security 

equivalent benefit (NSSEB). It also contains any tier 2 

benefit, vested dual benefit (VDB), and supplemental annuity benefit. Treat this category of benefits, shown on 

Form RRB-1099-R, as an amount received from a qualified employee plan. This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 

benefits and the NSSEB part of the tier 1 benefits. (The 

NSSEB and tier 2 benefits, less certain repayments, are 

combined into one amount called the Contributory 

Amount Paid on Form RRB-1099-R.) VDBs and supplemental annuity benefits are non-contributory pensions and 

are fully taxable. See Taxation of Periodic Payments, later, 

for information on how to report your benefits and how to 

recover the employee contributions tax free. Form 

RRB-1099-R is used for U.S. citizens, resident aliens, and 

nonresident aliens.

Nonresident aliens. A nonresident alien is an individual 

who isn't a citizen or a resident alien of the United States. 

If you are a nonresident alien, you are subject to U.S. tax 

on your SSEB portion of tier 1 benefits at a 30% rate, unless exempt or subject to a lower treaty rate. See Pub. 

519, U.S. Tax Guide for Aliens, for more information.

If your rate of tax changed or your country of legal residence changed during the tax year, you may receive more 

than one Form RRB-1042S or RRB-1099-R. To determine 

your total benefits paid or repaid and total tax withheld for 

the year, you should add the amounts shown on all forms 

you received for that year.

Tax withholding. To request or change your income tax 

withholding from SSEB payments, U.S. citizens should 

contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. To elect, revoke, or change 

your income tax withholding from NSSEB, tier 2, VDB, and 

supplemental annuity payments received, use Form RRB 

W-4P, Withholding Certificate for Railroad Retirement Payments. If you are a nonresident alien or a U.S. citizen living 

abroad, you should provide Form RRB-1001, Nonresident 

Questionnaire, to the RRB to furnish citizenship and residency information and to claim any treaty exemption from 

U.S. tax withholding. Nonresident U.S. citizens can't elect 

to be exempt from withholding on payments delivered outside the United States.

Help from the RRB. To request an RRB form or to get 

help with questions about an RRB benefit, you should 

contact your nearest RRB field office if you reside in the 

United States (call 877-772-5772 for the nearest field office) or U.S. Consulate/Embassy if you reside outside the 

United States. You can visit the RRB on the Internet at 

RRB.gov.

Form RRB-1099-R. The following discussion explains 

the items shown on Form RRB-1099-R. The amounts 

shown on this form are before any deduction for:

• Federal income tax withholding;

• Medicare premiums;

• Legal process garnishment payments;

• Recovery of a prior-year overpayment of an NSSEB, 

tier 2 benefit, VDB, or supplemental annuity benefit; or

• Recovery of Railroad Unemployment Insurance Act 

benefits received while awaiting payment of your railroad retirement annuity.

The amounts shown on this form are after any offset 

for:

• Social security benefits;

• Age reduction;

• Public service pensions or public disability benefits;

• Dual railroad retirement entitlement under another 

RRB claim number;

• Work deductions;

• Legal process partition deductions;

• Actuarial adjustment;

• Annuity waiver; or

• Recovery of a current-year overpayment of NSSEB, 

tier 2 benefits, VDB, or supplemental annuity benefits.

The amounts shown on Form RRB-1099-R don't reflect 

any special rules, such as capital gain treatment or the 

special 10-year tax option for lump-sum payments, or 

tax-free rollovers. To determine if any of these rules apply 

to your benefits, see the discussions about them later.

Generally, amounts shown on your Form RRB-1099-R 

are considered a normal distribution. Use distribution 

code “7” if you are asked for a distribution code. Distribution codes aren't shown on Form RRB-1099-R.

There are three copies of this form. Copy B is to be included with your income tax return if federal income tax is 

withheld. Copy C is for your own records. Copy 2 is filed 

with your state, city, or local income tax return when required. See the illustrated Copy B (Form RRB-1099-R), 

later.

Each beneficiary will receive their own Form 

RRB-1099-R. If you receive benefits on more than 

one railroad retirement record, you may get more 

than one Form RRB-1099-R. So that you get your form 

timely, make sure the RRB always has your current mailing 

address.

Box 1—Claim Number and Payee Code. Your claim 

number is a six- or nine-digit number preceded by an 

TIP

Publication 575 (2023) 7
alphabetical prefix. This is the number under which the 

RRB paid your benefits. Your payee code follows your 

claim number and is the last number in this box. It is used 

by the RRB to identify you under your claim number. In all 

your correspondence with the RRB, be sure to use the 

claim number and payee code shown in this box.

Box 2—Recipient's Identification Number. This is 

the recipient's U.S. taxpayer identification number (TIN). It 

is the social security number (SSN), individual taxpayer 

identification number (ITIN), or employer identification 

number (EIN), if known, for the person or estate listed as 

the recipient.

If you are a resident or nonresident alien who 

must furnish a TIN to the IRS and aren’t eligible to 

obtain an SSN, use Form W-7, Application for IRS 

Individual Taxpayer Identification Number, to apply for an 

ITIN. The Instructions for Form W-7 explain how and when 

to apply.

Box 3—Employee Contributions. This is the amount 

of taxes withheld from the railroad employee's earnings 

that exceeds the amount of taxes that would have been 

withheld had the earnings been covered under the social 

security system. This amount is the employee's cost that 

you use to figure the tax-free part of the NSSEB and tier 2 

benefit you received (the amount shown in box 4). (For information on how to figure the tax-free part, see Partly 

Taxable Payments under Taxation of Periodic Payments, 

later.) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB 

calculated as previously recovered. It is the latest amount 

reported for 2023 and may have increased or decreased 

from a previous Form RRB-1099-R. If this amount has 

changed, the change is retroactive. You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2023 

and prior tax years. If this box is blank, it means that the 

amount of your NSSEB and tier 2 payments shown in 

box 4 is fully taxable.

TIP

If you had a previous annuity entitlement that 

ended and you are figuring the tax-free part of 

your NSSEB/tier 2 benefit for your current annuity 

entitlement, you should contact the RRB for confirmation 

of your correct employee contribution amount.

Box 4—Contributory Amount Paid. This is the gross 

amount of the NSSEB and tier 2 benefit you received in 

2023, less any 2023 benefits you repaid in 2023. (Any 

benefits you repaid in 2023 for an earlier year or for an unknown year are shown in box 8.) This amount is the total 

contributory pension paid in 2023. It may be partly taxable 

and partly tax free or fully taxable. If you determine you are 

eligible to compute a tax-free part, as explained later in 

Partly Taxable Payments under Taxation of Periodic Payments, use the latest reported employee contribution 

amount shown in box 3 as the cost.

Box 5—Vested Dual Benefit. This is the gross 

amount of VDB payments paid in 2023, less any 2023 

VDB payments you repaid in 2023. It is fully taxable. VDB 

payments you repaid in 2023 for an earlier year or for an 

unknown year are shown in box 8.

Note. The amounts shown in boxes 4 and 5 may represent payments for 2023 and/or other years after 1983.

Box 6—Supplemental Annuity. This is the gross 

amount of supplemental annuity benefits paid in 2023, 

less any 2023 supplemental annuity benefits you repaid in 

2022. It is fully taxable. Supplemental annuity benefits you 

repaid in 2023 for an earlier year or for an unknown year 

are shown in box 8.

Box 7—Total Gross Paid. This is the sum of boxes 4, 

5, and 6. The amount represents the total pension paid in 

2023. Include this amount on Form 1040, 1040-SR, or 

1040-NR, line 5a.

Box 8—Repayments. This amount represents any 

NSSEB, tier 2 benefit, VDB, and supplemental annuity 

CAUTION

!

PAYER’S NAME, STREET ADDRESS, CITY, STATE, AND ZIP CODE

UNITED STATES RAILROAD RETIREMENT BOARD

844 N RUSH ST CHICAGO IL 60611-1275

ANNUITIES OR PENSIONS BY THE

RAILROAD RETIREMENT BOARD

PAYER’S FEDERAL IDENTIFYING NO. 36-3314600

FORM RRB-1099-R

COPY B -

REPORT THIS INCOME ON

YOUR FEDERAL TAX

RETURN. IF THIS FORM

SHOWS FEDERAL INCOME

TAX WITHHELD IN BOX 9,

ATTACH THIS COPY TO

YOUR RETURN.

THIS INFORMATION IS BEING

FURNISHED TO THE INTERNAL

REVENUE SERVICE.

1.

2.

Claim Number and Payee Code

Recipient’s Number

Recipient’s Name, Street Address, City, State, and Zip Code

3.

4.

5.

6.

7.

8.

9.

10.

Employee Contributions

Contributory Amount Paid

Vested Dual

Supplemental Annuity

Total Gross Paid

(Sum of boxes 4, 5, and 6)

Repayments

Federal Income Tax

Withheld

Medicare Premium Total

2023

8 Publication 575 (2023)
benefit you repaid to the RRB in 2023 for years before 

2023 or for unknown years. The amount shown in this box 

hasn't been deducted from the amounts shown in boxes 4, 

5, and 6. It only includes repayments of benefits that were 

taxable to you. This means it only includes repayments in 

2023 of NSSEB paid after 1985, tier 2 benefits and VDB 

paid after 1983, and supplemental annuity benefits paid in 

any year. If you included the benefits in your income in the 

year you received them, you may be able to deduct the repaid amount. For more information about repayments, see 

Repayment of benefits received in an earlier year, later.

You may have repaid an overpayment of benefits 

by returning a payment, by making a payment, or 

by having an amount withheld from your railroad 

retirement annuity payment.

Box 9—Federal Income Tax Withheld. This is the total federal income tax withheld from your NSSEB, tier 2 

benefit, VDB, and supplemental annuity benefit. Include 

this on your income tax return as tax withheld. If you are a 

nonresident alien and your tax withholding rate and/or 

country of legal residence changed during 2023, you will 

receive more than one Form RRB-1099-R for 2023. Determine the total amount of U.S. federal income tax withheld 

from your 2023 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all 

original 2023 Forms RRB-1099-R, or the latest corrected 

or duplicate Forms RRB-1099-R you receive.

Box 10—Rate of Tax. If you are a nonresident alien, 

an entry in this box indicates the rate at which tax was 

withheld on the NSSEB, tier 2, VDB, and supplemental 

annuity payments that were paid to you in 2023. If you are 

a nonresident alien whose tax was withheld at more than 

one rate during 2023, you will receive a separate Form 

RRB-1099-R for each rate change during 2023. If you are 

taxed as a U.S. citizen or resident alien, this box doesn't 

apply to you.

Box 11—Country. If you are a nonresident alien, an 

entry in this box indicates the country of which you were a 

resident for tax purposes at the time you received railroad 

retirement payments in 2023. If you are a nonresident 

alien who was a resident of more than one country during 

2023, you will receive a separate Form RRB-1099-R for 

each country of residence during 2023. If you are taxed as 

a U.S. citizen or resident alien, this box doesn't apply to 

you.

Box 12—Medicare Premium Total. This is for information purposes only. The amount shown in this box represents the total amount of Medicare Part B premiums deducted from your railroad retirement annuity payments in 

2023. Medicare premium refunds aren't included in the 

Medicare total. The Medicare total is normally shown on 

Form RRB-1099 (if you are a citizen or resident alien of 

the United States) or Form RRB-1042S (if you are a nonresident alien). However, if Form RRB-1099 or Form 

RRB-1042S isn't required for 2023, then this total will be 

shown on Form RRB-1099-R. If your Medicare premiums 

were deducted from your social security benefits, paid by 

a third party, refunded to you, and/or you paid the 

TIP

premiums by direct billing, your Medicare total won't be 

shown in this box.

Repayment of benefits received in an earlier year. If 

you had to repay any railroad retirement benefits that you 

had included in your income in an earlier year because at 

that time you thought you had an unrestricted right to it, 

you can deduct the amount you repaid in the year in which 

you repaid it.

However, if you repaid $3,000, or less, for tax years 

2018 through 2025, miscellaneous itemized deductions 

subject to the 2%-of-adjusted-gross-income limit are suspended and therefore not deductible on Schedule A (Form 

1040).

If you repaid more than $3,000 in 2023, you can either 

take a deduction for the amount repaid on Schedule A 

(Form 1040), line 16, or you can take a credit against your 

tax. For more information, see Repayments in Pub. 525.

Withholding Tax and Estimated Tax

Your retirement plan distributions are subject to federal income tax withholding. However, you can choose not to 

have tax withheld on payments you receive unless they 

are eligible rollover distributions. (These are distributions, 

described later under Rollovers, that are eligible for rollover treatment but aren't paid directly to another qualified 

retirement plan or to a traditional IRA.) If you choose not to 

have tax withheld or if you don't have enough tax withheld, 

you may have to make estimated tax payments. See Estimated tax, later.

The withholding rules apply to the taxable part of payments you receive from:

• An employer pension, annuity, profit-sharing, or stock 

bonus plan;

• Any other deferred compensation plan;

• A traditional IRA; or

• A commercial annuity.

For this purpose, a commercial annuity means an annuity, 

endowment, or life insurance contract issued by an insurance company.

There will be no withholding on any part of a distribution where it is reasonable to believe that it 

won't be includible in gross income.

Choosing no withholding. You can choose not to have 

income tax withheld from retirement plan payments unless 

they are eligible rollover distributions. You can make this 

choice on Form W-4P for periodic payments or Form 

W-4R for nonperiodic payments. This choice generally remains in effect until you revoke it.

The payer will ignore your choice not to have tax withheld if:

• You don't give the payer your SSN (in the required 

manner); or

• The IRS notifies the payer, before the payment is 

made, that you gave an incorrect SSN.

TIP

Publication 575 (2023) 9
To choose not to have tax withheld, a U.S. citizen or 

resident alien must give the payer a home address in the 

United States or its territories. Without that address, the 

payer must withhold tax. For example, the payer has to 

withhold tax if the recipient has provided a U.S. address 

for a nominee, trustee, or agent to whom the benefits are 

delivered, but hasn't provided their own U.S. home address.

If you don't give the payer a home address in the United 

States or its territories, you can choose not to have tax 

withheld only if you certify to the payer that you aren't a 

U.S. citizen, a U.S. resident alien, or someone who is subject to section 877 because you expatriated before June 

17, 2008. See Form 8854 and its instructions for details 

about section 877. But, if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. This 30% rate won't apply if you are exempt 

or subject to a reduced rate by treaty. For details, see Pub. 

519.

Periodic payments. Unless you choose no withholding, 

your annuity or similar periodic payments (other than eligible rollover distributions) will be treated as wages for withholding purposes. Periodic payments are amounts paid at 

regular intervals (such as weekly, monthly, or yearly) for a 

period of time greater than 1 year (such as for 15 years or 

for life). You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by 

the payer). If you don't, tax will be withheld as if you were 

single with no adjustments made in Steps 2 through 4 on 

Form W-4P.

Tax will be withheld as if you were single with no adjustments made in Steps 2 through 4 on Form W-4P if:

• You don't give the payer your SSN (in the required 

manner), or

• The IRS notifies the payer (before any payment is 

made) that you gave an incorrect SSN.

You must file a new withholding certificate to change 

the amount of withholding. See the instructions for Form 

W-P and Periodic Payments in Pub. 505 for more information.

Nonperiodic distributions. Unless you choose no withholding, the withholding rate for a nonperiodic distribution 

(a payment other than a periodic payment) that isn't an eligible rollover distribution is 10% of the distribution. You 

can also ask the payer to withhold an additional amount 

using Form W-4R. The part of any loan treated as a distribution (except an offset amount to repay the loan), explained later, is subject to withholding under this rule.

Eligible rollover distribution. If you receive an eligible 

rollover distribution, 20% of it will generally be withheld for 

income tax. You can't choose not to have tax withheld 

from an eligible rollover distribution. However, tax won't be 

withheld if you have the plan administrator pay the eligible 

rollover distribution directly to another qualified plan or an 

IRA in a direct rollover. For more information about eligible 

rollover distributions, see Rollovers, later.

Estimated tax. Your estimated tax is the total of your expected income tax, self-employment tax, and certain other 

taxes for the year, minus your expected credits and withheld tax. Generally, you must make estimated tax payments for 2024 if you expect to owe at least $1,000 in tax 

(after subtracting your withholding and credits) and you 

expect your withholding and credits to be less than the 

smaller of:

1. 90% of the tax to be shown on your 2024 return, or

2. 100% of the tax shown on your 2023 return.

If your adjusted gross income for 2023 was more than 

$150,000 ($75,000 if your filing status for 2024 is married 

filing separately), substitute 110% for 100% in (2) above. 

For more information, see Pub. 505.

In figuring your withholding or estimated tax, remember that a part of your monthly social security 

or equivalent tier 1 railroad retirement benefits 

may be taxable. See Pub. 915. You can choose to have income tax withheld from those benefits. Use Form W-4V to 

make this choice.

Cost (Investment in the 

Contract)

Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). If any part of a distribution is treated 

as a recovery of your cost under the rules explained in this 

publication, that part is tax free. Therefore, the first step in 

figuring how much of a distribution is taxable is to determine the cost of your pension or annuity.

In general, your cost is your net investment in the contract as of the annuity starting date (or the date of the distribution if earlier). To find this amount, you must first figure 

the total premiums, contributions, or other amounts you 

paid. This includes the amounts your employer contributed that were taxable to you when paid. However, see 

Foreign employment contributions, later. It doesn't include 

amounts withheld from your pay on a tax-deferred basis 

(money that was taken out of your gross pay before taxes 

were deducted). It also doesn't include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability 

benefits).

From this total cost you must subtract the following 

amounts.

1. Any refunded premiums, rebates, dividends, or unrepaid loans that weren't included in your income and 

that you received by the later of the annuity starting 

date or the date on which you received your first payment.

2. Any other tax-free amounts you received under the 

contract or plan by the later of the dates in (1).

TIP

10 Publication 575 (2023)
3. If you must use the Simplified Method for your annuity 

payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. (See 

Simplified Method, later, for information on its required 

use.)

4. If you use the General Rule for your annuity payments, 

the value of the refund feature in your annuity contract. (See General Rule, later, for information on its 

use.) Your annuity contract has a refund feature if the 

annuity payments are for your life (or the lives of you 

and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated 

amount or a stated number of payments are made. 

For more information, see Pub. 939.

The tax treatment of the items described in (1) through (3) 

is discussed later under Taxation of Nonperiodic Payments.

Form 1099-R. If you began receiving periodic 

payments of a life annuity in 2023, the payer 

should show your total contributions to the plan in 

box 9b of your 2023 Form 1099-R.

Annuity starting date defined. Your annuity starting 

date is the later of the first day of the first period for which 

you received a payment or the date the plan's obligations 

became fixed.

Example. On January 1, you completed all your payments required under an annuity contract providing for 

monthly payments starting on August 1 for the period beginning July 1. The annuity starting date is July 1. This is 

the date you use in figuring the cost of the contract and 

selecting the appropriate number from Table 1 for line 3 of 

the Simplified Method Worksheet.

Designated Roth accounts. Your cost in these accounts 

is your designated Roth contributions that were included 

in your income as wages subject to applicable withholding 

requirements. Your cost will also include any in-plan Roth 

rollovers, designated Roth nonelective contributions, or 

designated Roth matching contributions you included in 

income.

Foreign employment contributions. If you worked 

abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludable from your gross income had 

they been paid directly to you as compensation. The contributions that apply are:

1. Contributions before 1963 by your employer,

2. Contributions after 1962 by your employer if the contributions would be excludable from your gross income (not including the foreign earned income exclusion) had they been paid directly to you, or

3. Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a 

TIP

church or a lay person) but only if the contributions 

would be excludable from your gross income had they 

been paid directly to you.

Foreign employment contributions while a nonresident alien. In determining your cost, special rules apply 

if you are a U.S. citizen or resident alien who received distributions in 2023 from a plan to which contributions were 

made while you were a nonresident alien. Your contributions and your employer's contributions aren't included in 

your cost if the contribution:

• Was made based on compensation which was for 

services performed outside the United States while 

you were a nonresident alien; and

• Wasn't subject to income tax under the laws of the 

United States or any foreign country, but only if the 

contribution would have been subject to income tax if 

paid as cash compensation when the services were 

performed.

Taxation of Periodic Payments

This section explains how the periodic payments you receive from a pension or annuity plan are taxed. Periodic 

payments are amounts paid at regular intervals (such as 

weekly, monthly, or yearly) for a period of time greater than 

1 year (such as for 15 years or for life). These payments 

are also known as amounts received as an annuity. If you 

receive an amount from your plan that isn't a periodic payment, see Taxation of Nonperiodic Payments, later.

In general, you can recover the cost of your pension or 

annuity tax free over the period you are to receive the payments. The amount of each payment that is more than the 

part that represents your cost is taxable. However, see Insurance Premiums for Retired Public Safety Officers, earlier.

Designated Roth accounts. If you receive a qualified 

distribution from a designated Roth account, the distribution isn't included in your gross income. This applies to 

both your cost in the account and income earned on that 

account. A qualified distribution is generally a distribution that is:

• Made after a 5-tax-year period of participation; and

• Made on or after the date you reach age 591/2, made 

to a beneficiary or your estate on or after your death, 

or attributable to your being disabled.

If the distribution isn't a qualified distribution, the rules 

discussed in this section apply. The designated Roth account is treated as a separate contract.

Period of participation. The 5-tax-year period of participation is the 5-tax-year period beginning with the first 

tax year for which a contribution was made to the participant's designated Roth account in the plan. Therefore, if a 

contribution is first made to a participant's designated 

Roth account in the plan for 2023, the first year for which a 

qualified distribution can be made is 2028.

Publication 575 (2023) 11
However, if a direct rollover is made to the plan from a 

designated Roth account under another plan, the 

5-tax-year period for the recipient plan begins with the first 

tax year for which a contribution was made to the participant's designated Roth account in the other plan (if earlier).

Your 401(k), 403(b), or 457(b) plan may permit you to 

roll over amounts from those plans to a designated Roth 

account within the same plan. This is known as an in-plan 

Roth rollover. If an in-plan Roth rollover is the first contribution made to your designated Roth account, the 5-tax-year 

period of participation begins on the first day of the first 

tax year in which you make the in-plan Roth rollover.

For more details, see In-plan Roth rollovers, later.

Fully Taxable Payments

The pension or annuity payments that you receive are fully 

taxable if you have no cost in the contract because any of 

the following situations apply to you. However, see Insurance Premiums for Retired Public Safety Officers, earlier.

• You didn't pay anything or aren't considered to have 

paid anything for your pension or annuity. Amounts 

withheld from your pay on a tax-deferred basis aren't 

considered part of the cost of the pension or annuity 

payment.

• Your employer didn't withhold contributions from your 

salary.

• You got back all of your contributions tax free in prior 

years. However, see Exclusion not limited to cost under Partly Taxable Payments, later.

Report the total amount you received on Form 1040, 

1040-SR, or 1040-NR, line 5b. You should make no entry 

on Form 1040, 1040-SR, or 1040-NR, line 5a.

Deductible voluntary employee contributions. Distributions you receive that are based on your accumulated 

deductible voluntary employee contributions are generally 

fully taxable in the year distributed to you. Accumulated 

deductible voluntary employee contributions include net 

earnings on the contributions. If distributed as part of a 

lump sum, they don't qualify for the 10-year tax option or 

capital gain treatment, explained later.

Partly Taxable Payments

If you have a cost to recover from your pension or annuity 

plan (see Cost (Investment in the Contract), earlier), you 

can exclude part of each annuity payment from income as 

a recovery of your cost. This tax-free part of the payment 

is figured when your annuity starts and remains the same 

each year even if the amount of the payment changes. 

The rest of each payment is taxable. However, see Insurance Premiums for Retired Public Safety Officers, earlier.

You figure the tax-free part of the payment using one of 

the following methods.

• Simplified Method. You must generally use this 

method if your annuity is paid under a qualified plan (a 

qualified employee plan, a qualified employee annuity, 

or a tax-sheltered annuity plan or contract). You can't 

use this method if your annuity is paid under a nonqualified plan.

• General Rule. You must use this method if your annuity is paid under a nonqualified plan. Generally, you 

can't use this method if your annuity is paid under a 

qualified plan. However, see Qualified plan annuity 

starting before November 19, 1996, later, for exceptions to this rule.

You determine which method to use when you first begin 

receiving your annuity, and you continue using it each year 

that you recover part of your cost.

If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each 

separately.

Qualified plan annuity starting before November 19, 

1996. If your annuity is paid under a qualified plan and 

your annuity starting date (defined earlier under Cost (Investment in the Contract)) is after July 1, 1986, and before 

November 19, 1996, you could have chosen to use either 

the Simplified Method or the General Rule. If your annuity 

starting date is before July 2, 1986, you use the General 

Rule unless your annuity qualified for the 3-year Rule. If 

you used the 3-year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are 

generally now fully taxable.

Exclusion limit. Your annuity starting date determines 

the total amount of annuity payments that you can exclude 

from income over the years. Once your annuity starting 

date is determined, it doesn't change. If you calculate the 

taxable portion of your annuity payments using the Simplified Method Worksheet, the annuity starting date determines the recovery period for your cost. That recovery period begins on your annuity starting date and isn't affected 

by the date you first complete the worksheet.

Exclusion limited to cost. If your annuity starting 

date is after 1986, the total amount of annuity income that 

you can exclude over the years as a recovery of the cost 

can't exceed your total cost. Any unrecovered cost at your 

(or the last annuitant's) death is allowed as an itemized 

deduction on the final return of the decedent.

Example 1. Your annuity starting date is after 1986, 

and you exclude $100 a month ($1,200 a year) under the 

Simplified Method. The total cost of your annuity is 

$12,000. Your exclusion ends when you have recovered 

your cost tax free, that is, after 10 years (120 months). After that, your annuity payments are generally fully taxable.

Example 2. The facts are the same as in Example 1, 

except you die (with no surviving annuitant) after the 

eighth year of retirement. You have recovered tax free only 

$9,600 (8 × $1,200) of your cost. An itemized deduction 

for your unrecovered cost of $2,400 ($12,000 – $9,600) 

can be taken on your final return.

Exclusion not limited to cost. If your annuity starting 

date is before 1987, you can continue to take your monthly 

exclusion for as long as you receive your annuity. If you 

12 Publication 575 (2023)
chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. The total exclusion may be more than 

your cost.

Simplified Method

Under the Simplified Method, you figure the tax-free part 

of each annuity payment by dividing your cost by the total 

number of anticipated monthly payments. For an annuity 

that is payable for the lives of the annuitants, this number 

is based on the annuitants' ages on the annuity starting 

date and is determined from a table. For any other annuity, 

this number is the number of monthly annuity payments 

under the contract.

Who must use the Simplified Method. You must use 

the Simplified Method if your annuity starting date is after 

November 18, 1996, and you meet both of the following 

conditions.

1. You receive your pension or annuity payments from 

any of the following plans.

a. A qualified employee plan.

b. A qualified employee annuity.

c. A tax-sheltered annuity plan (403(b) plan).

2. On your annuity starting date, at least one of the following conditions applies to you.

a. You are under age 75.

b. You are entitled to less than 5 years of guaranteed 

payments.

Guaranteed payments. Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of 

your investment) is payable even if you and any survivor 

annuitant don't live to receive the minimum. If the minimum amount is less than the total amount of the payments 

you are to receive, barring death, during the first 5 years 

after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments.

Annuity starting before November 19, 1996. If your 

annuity starting date is after July 1, 1986, and before November 19, 1996, and you chose to use the Simplified 

Method, you must continue to use it each year that you recover part of your cost. You could have chosen to use the 

Simplified Method if your annuity is payable for your life (or 

the lives of you and your survivor annuitant) and you met 

both of the conditions listed earlier under Who must use 

the Simplified Method.

Who can't use the Simplified Method. You can't use 

the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise don't meet the 

conditions described in the preceding discussion. See 

General Rule, later.

How to use the Simplified Method. Complete Worksheet A near the end of this publication to figure your taxable annuity for 2023. Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year.

To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for 

your annuity. How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. For 

this purpose, treat an annuity that is payable over the life 

of an annuitant as payable for that annuitant's life even if 

the annuity has a fixed-period feature or also provides a 

temporary annuity payable to the annuitant's child under 

age 25.

You don't need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last 

year's worksheet to figure your taxable annuity. Instead, 

enter the amount from line 4 of last year's worksheet on 

line 4 of this year's worksheet.

Single-life annuity. If your annuity is payable for your 

life alone, use Table 1 at the bottom of the worksheet to 

determine the total number of expected monthly payments. Enter on line 3 the number shown for your age on 

your annuity starting date. This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996.

Multiple-lives annuity. If your annuity is payable for 

the lives of more than one annuitant, use Table 2 at the 

bottom of the worksheet to determine the total number of 

expected monthly payments. Enter on line 3 the number 

shown for the annuitants' combined ages on the annuity 

starting date. For an annuity payable to you as the primary 

annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. For an annuity that has no primary annuitant and is 

payable to you and others as survivor annuitants, combine 

the ages of the oldest and youngest annuitants. Don't treat 

as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death.

However, if your annuity starting date is before 1998, 

don't use Table 2 and don't combine the annuitants' ages. 

Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. This 

number will differ depending on whether your annuity 

starting date is before November 19, 1996, or after November 18, 1996.

Fixed-period annuity. If your annuity doesn't depend 

in whole or in part on anyone's life expectancy, the total 

number of expected monthly payments to enter on line 3 

of the worksheet is the number of monthly annuity payments under the contract.

Line 6. The amount on line 6 should include all 

amounts that could have been recovered in prior years. If 

you didn't recover an amount in a prior year, you may be 

able to amend your returns for the affected years.

TIP

Publication 575 (2023) 13
Example. Bill Smith, age 65, began receiving retirement benefits in 2023 under a joint and survivor annuity. 

Bill's annuity starting date is January 1, 2023. The benefits 

are to be paid for the joint lives of Bill and his spouse, age 

65. Bill had contributed $31,000 to a qualified plan and 

had received no distributions before the annuity starting 

date. Bill is to receive a retirement benefit of $1,200 a 

month, and his spouse is to receive a monthly survivor 

benefit of $600 upon Bill's death.

Bill must use the Simplified Method to figure his taxable 

annuity because his payments are from a qualified plan 

and he is under age 75. Because his annuity is payable 

over the lives of more than one annuitant, he uses his and 

his spouse's combined ages and Table 2 at the bottom of 

Worksheet A in completing line 3 of the worksheet. His 

completed worksheet is shown later.

Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) 

as shown on line 4 of the worksheet. Upon Bill's death, if 

Bill hasn't recovered the full $31,000 investment, his 

spouse will also exclude $100 from her $600 monthly payment. The full amount of any annuity payments received 

after 310 payments are paid must be included in gross income.

If Bill and his spouse die before 310 payments are 

made, an itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die.

Multiple annuitants. If you and one or more other annuitants receive payments at the same time, you exclude 

from each annuity payment a pro rata share of the monthly 

tax-free amount. Figure your share by taking the following 

steps.

1. Complete your worksheet through line 4 to figure the 

monthly tax-free amount.

2. Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants.

3. Multiply the amount on line 4 of your worksheet by the 

amount figured in (2) above. The result is your share 

of the monthly tax-free amount.

Replace the amount on line 4 of the worksheet with the 

result in (3) above. Enter that amount on line 4 of your 

worksheet each year.

General Rule

Under the General Rule, you determine the tax-free part of 

each annuity payment based on the ratio of the cost of the 

contract to the total expected return. Expected return is 

the total amount you and other eligible annuitants can expect to receive under the contract. To figure it, you must 

use life expectancy (actuarial) tables prescribed by the 

IRS.

Who must use the General Rule. You must use the 

General Rule if you receive pension or annuity payments 

from a:

• Nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or

• Qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years.

Annuity starting before November 19, 1996. If your 

annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. You also had to use it for 

any fixed-period annuity. If you didn't have to use the General Rule, you could have chosen to use it. If your annuity 

starting date is before July 2, 1986, you had to use the 

General Rule unless you could use the 3-year Rule.

If you had to use the General Rule (or chose to use it), 

you must continue to use it each year that you recover 

your cost.

Who can't use the General Rule. You can't use the 

General Rule if you receive your pension or annuity from a 

qualified plan and none of the circumstances described in 

the preceding discussions apply to you. See Simplified 

Method, earlier.

More information. For complete information on using the 

General Rule, including the actuarial tables you need, see 

Pub. 939.

Taxation of Nonperiodic 

Payments

This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity 

plan are taxed. Nonperiodic distributions are also known 

as amounts not received as an annuity. They include all 

payments other than periodic payments and corrective 

distributions.

For example, the following items are treated as nonperiodic distributions.

• Cash withdrawals.

• Distributions of current earnings (dividends) on your 

investment. However, don't include these distributions 

in your income to the extent the insurer keeps them to 

pay premiums or other consideration for the contract.

• Certain loans. See Loans Treated as Distributions, 

later.

• The value of annuity contracts transferred without full 

and adequate consideration. See Transfers of Annuity 

Contracts, later.

Corrective distributions of excess plan contributions. 

Generally, if the contributions made for you during the year 

to certain retirement plans exceed certain limits, the excess is taxable to you. To correct an excess, your plan 

may distribute it to you (along with any income earned on 

the excess). Although the plan reports the corrective distributions on Form 1099-R, the distribution isn't treated as a 

nonperiodic distribution from the plan. It isn't subject to the 

allocation rules explained in the following discussion, it 

14 Publication 575 (2023)
Worksheet A. Simplified Method Worksheet for Bill Smith

Keep for Your Records

1. Enter the total pension or annuity payments received this year. Also, add this amount to the total 

for Form 1040, 1040-SR, or 1040-NR, line 5a ............................................ 1. $ 14,400

2. Enter your cost in the plan (contract) at the annuity starting date plus any death benefit 

exclusion.* See Cost (Investment in the Contract), earlier .................................. 2. 31,000

Note: If your annuity starting date was before this year and 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.

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 ............................................................ 3. 310

4. Divide line 2 by the number on line 3 .................................................... 4. 100

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, enter this amount on line 8 below and skip lines 6, 7, 10, 

and 11. Otherwise, go to line 6 ......................................................... 5. 1,200

6. Enter any amount previously recovered tax free in years after 1986. This is the amount shown on 

line 10 of your worksheet for last year ................................................... 6. -0-

7. Subtract line 6 from line 2 ............................................................. 7. 31,000

8. Enter the smaller of line 5 or line 7 ...................................................... 8. 1,200

9. Taxable amount for year. Subtract line 8 from line 1. Enter the result, but not less than zero. 

Also, add this amount to the total for Form 1040, 1040-SR, or 1040-NR, line 5b. Note: If your 

Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. If you 

are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers

before entering an amount on your tax return ............................................ 9. $ 13,200

10. Was your annuity starting date before 1987?

 Yes. STOP. Don't complete the rest of this worksheet.

 No. Add lines 6 and 8. This is the amount you have recovered tax free through 2023. You will 

need this number if you need to fill out this worksheet next year ............................ 10. 1,200

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 ............................................................................. 11. $ 29,800

* A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996.

Table 1 for Line 3 Above

AND your annuity starting date was—

IF the age at annuity

starting date was...

BEFORE November 19,

1996, enter on line 3...

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

Publication 575 (2023) 15
can't be rolled over into another plan, and it isn't subject to 

the additional tax on early distributions.

If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess 

contributions, or excess annual additions), your 

Form 1099-R should have the code “8,” “B,” “P,” or “E” in 

box 7.

For information on plan contribution limits and how to 

report corrective distributions of excess contributions, see 

Retirement Plan Contributions under Employee Compensation in Pub. 525.

Figuring the Taxable Amount

How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity 

starting date, or on or after the annuity starting date. If it is 

made before the annuity starting date, its tax treatment 

also depends on whether it is made under a qualified or 

nonqualified plan. If it is made under a nonqualified plan, 

its tax treatment depends on whether it fully discharges 

the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you 

made before August 14, 1982.

You may be able to roll over the taxable amount of 

a nonperiodic distribution from a qualified retirement plan into another qualified retirement plan or 

a traditional IRA tax free. See Rollovers, later. If you don't 

make a tax-free rollover and the distribution qualifies as a 

lump-sum distribution, you may be able to elect an optional method of figuring the tax on the taxable amount. 

See Lump-Sum Distributions, later.

Annuity starting date. The annuity starting date is either 

the first day of the first period for which you receive an annuity payment under the contract or the date on which the 

obligation under the contract becomes fixed, whichever is 

later.

Distributions of employer securities. If you receive a 

distribution of employer securities from a qualified retirement plan, you may be able to defer the tax on the net unrealized appreciation (NUA) in the securities. The NUA is 

the net increase in the securities' value while they were in 

the trust. This tax deferral applies to distributions of the 

employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached.

If the distribution is a lump-sum distribution, tax is deferred on all of the NUA unless you choose to include it in 

your income for the year of the distribution.

A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance 

(within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid:

• Because of the plan participant's death;

• After the participant reaches age 591/2;

TIP TIP

• Because the participant, if an employee, separates 

from service; or

• After the participant, if a self-employed individual, becomes totally and permanently disabled.

If you choose to include NUA in your income for 

the year of the distribution and the participant was 

born before January 2, 1936, you may be able to 

figure the tax on the NUA using the optional methods described under Lump-Sum Distributions, later.

If the distribution isn't a lump-sum distribution, tax is deferred only on the NUA resulting from employee contributions other than deductible voluntary employee contributions.

The NUA on which tax is deferred should be shown in 

box 6 of the Form 1099-R you receive from the payer of 

the distribution.

When you sell or exchange employer securities with 

tax-deferred NUA, any gain is long-term capital gain up to 

the amount of the NUA that isn’t included in your basis in 

the employer securities. Any gain that is more than the 

NUA is long-term or short-term gain, depending on how 

long you held the securities after the distribution.

Your basis in the employer securities is the total of the 

following amounts.

• Your contributions to the plan that are attributable to 

the securities.

• Your employer's contributions that were taxed as ordinary income in the year the securities were distributed.

• Your NUA in the securities that is attributable to employer contributions and taxed as ordinary income in 

the year the securities were distributed.

How to report. Enter the total amount of a nonperiodic 

distribution on Form 1040, 1040-SR, or 1040-NR, line 5a. 

Enter the taxable amount of the distribution on Form 1040, 

1040-SR, or 1040-NR, line 5b. However, if you make a 

tax-free rollover or elect an optional method of figuring the 

tax on a lump-sum distribution, see How to report in the 

discussions of those tax treatments, later.

Distribution On or After Annuity Starting 

Date

If you receive a nonperiodic payment from your annuity 

contract on or after the annuity starting date, you must 

generally include all of the payment in gross income. For 

example, a cost-of-living increase in your pension after the 

annuity starting date is an amount not received as an annuity and, as such, is fully taxable.

Reduction in subsequent payments. If the annuity payments you receive are reduced because you received a 

nonperiodic distribution, you can exclude part of the nonperiodic distribution from gross income. The part you can 

exclude is equal to your cost in the contract reduced by 

any tax-free amounts you previously received under the 

contract, multiplied by a fraction. The numerator is the reduction in each annuity payment because of the 

TIP

16 Publication 575 (2023)
nonperiodic distribution. The denominator is the full unreduced amount of each annuity payment originally provided for.

Single-sum in connection with the start of annuity 

payments. If you receive a single-sum payment on or after your annuity starting date in connection with the start of 

annuity payments for which you must use the Simplified 

Method, treat the single-sum payment as if it were received before your annuity starting date. (See Simplified 

Method under Taxation of Periodic Payments, earlier, for 

information on its required use.) Follow the rules discussed under Distribution Before Annuity Starting Date 

From a Qualified Plan, later.

Distribution in full discharge of contract. You may receive an amount on or after the annuity starting date that 

fully satisfies the payer's obligation under the contract. 

The amount may be a refund of what you paid for the contract or for the complete surrender, redemption, or maturity of the contract. Include the amount in gross income 

only to the extent that it exceeds the remaining cost of the 

contract.

Distribution Before Annuity Starting Date 

From a Qualified Plan

If you receive a nonperiodic distribution before the annuity 

starting date from a qualified retirement plan, you can generally allocate only part of it to the cost of the contract. You 

exclude from your gross income the part that you allocate 

to the cost. You include the remainder in your gross income.

For this purpose, a qualified retirement plan is a:

• Qualified employee plan (or annuity contract purchased by such a plan),

• Qualified employee annuity plan, or

• Tax-sheltered annuity plan (403(b) plan).

Use the following formula to figure the tax-free amount 

of the distribution.

Amount 

received x

Cost of contract

=

Tax-free 

Account balance amount

For this purpose, your account balance includes only 

amounts to which you have a nonforfeitable right (a right 

that can't be taken away).

Example. Ann Brown received a $50,000 distribution 

from her retirement plan before her annuity starting date. 

She had $10,000 invested (cost) in the plan. Her account 

balance was $100,000. She can exclude $5,000 of the 

$50,000 distribution, figured as follows.

$50,000 x

$10,000

= $5,000 $100,000

Defined contribution plan. A defined contribution plan 

is a plan in which you have an individual account. Your 

benefits are based only on the amount contributed to the 

account and the income, gains or losses, etc., which may 

be allocated to that account. Under a defined contribution 

plan, your contributions (and income allocable to those 

contributions) may be treated as a separate contract for 

figuring the taxable part of any distribution. The employer 

contributions (and income allocable to those contributions) wouldn't be considered part of that separate contract.

Example. Ryan participates in a defined contribution 

plan that treats employee contributions and earnings allocable to them as a separate contract. He received a 

non-annuity distribution of $5,000 before his annuity starting date. He had made after-tax contributions of $10,000. 

The earnings allocable to his contributions were $2,500. 

His employer also contributed $10,000. The earnings allocable to the employer contributions were $2,500.

To determine the tax-free amount of Ryan's distribution, 

use the same formula shown earlier. However, because 

employee contributions are treated as a separate contract, 

the account balance would be the total of Ryan's contributions and allocable earnings.

Thus, the tax-free amount would be $5,000 × ($10,000 

÷ $12,500) = $4,000. The taxable amount would be 

$1,000 ($5,000 − $4,000).

If the employee contributions weren't treated as a separate contract, the tax-free amount would be $2,000 

($5,000 × ($10,000 ÷ $25,000)) and the taxable amount 

would be $3,000 ($5,000 − $2,000).

Plans that permitted withdrawal of employee contributions. If you contributed before 1987 to a pension plan 

that, as of May 5, 1986, permitted you to withdraw your 

contributions before your separation from service, any distribution before your annuity starting date is tax free to the 

extent that it, when added to earlier distributions received 

after 1986, doesn't exceed your cost as of December 31, 

1986. Apply the allocation described in the preceding discussion only to any excess distribution.

Distribution Before Annuity Starting Date 

From a Nonqualified Plan

If you receive a nonperiodic distribution before the annuity 

starting date from a plan other than a qualified retirement 

plan (nonqualified plan), it is allocated first to earnings (the 

taxable part) and then to the cost of the contract (the 

tax-free part). This allocation rule applies, for example, to 

a commercial annuity contract you bought directly from 

the issuer. You include in your gross income the smaller 

of:

• The nonperiodic distribution, or

Publication 575 (2023) 17
• The amount by which the cash value of the contract 

(figured without considering any surrender charge) immediately before you receive the distribution exceeds 

your investment in the contract at that time.

Example. You bought an annuity from an insurance 

company. Before the annuity starting date under your annuity contract, you received a $7,000 distribution. At the 

time of the distribution, the annuity had a cash value of 

$16,000 and your investment in the contract was $10,000. 

The distribution is allocated first to earnings, so you must 

include $6,000 ($16,000 − $10,000) in your gross income. 

The remaining $1,000 ($7,000 − $6,000) is a tax-free return of part of your investment.

Exception to allocation rule. Certain nonperiodic distributions received before the annuity starting date aren't 

subject to the allocation rule in the preceding discussion. 

Instead, you include the amount of the payment in gross 

income only to the extent that it exceeds the cost of the 

contract.

This exception applies to the following distributions.

• Distributions in full discharge of a contract that you receive as a refund of what you paid for the contract or 

for the complete surrender, redemption, or maturity of 

the contract.

• Distributions from life insurance or endowment contracts (other than modified endowment contracts, as 

defined in section 7702A of the Internal Revenue 

Code) that aren't received as an annuity under the 

contracts.

• Distributions under contracts entered into before August 14, 1982, to the extent that they are allocable to 

your investment before August 14, 1982.

If you bought an annuity contract before August 14, 

1982, and made investments both before and after August 

14, 1982, the distributed amounts are allocated to your investment or to earnings in the following order.

1. The part of your investment that was made before August 14, 1982. This part of the distribution is tax free.

2. The earnings on the part of your investment that was 

made before August 14, 1982. This part of the distribution is taxable.

3. The earnings on the part of your investment that was 

made after August 13, 1982. This part of the distribution is taxable.

4. The part of your investment that was made after August 13, 1982. This part of the distribution is tax free.

The taxable portion of distributions from nonqualified plans is subject to the NIIT. See the Instructions for Form 8960.

Distribution of U.S. savings bonds. If you receive U.S. 

savings bonds in a taxable distribution from a retirement 

or profit-sharing plan, report the value of the bonds at the 

time of distribution as income. The value of the bonds includes accrued interest. When you cash the bonds, your 

CAUTION

!

Form 1099-INT will show the total interest accrued, including the part you reported when the bonds were distributed 

to you. For information on how to adjust your interest income for U.S. savings bond interest you previously reported, see How To Report Interest Income in chapter 1 of 

Pub. 550, Investment Income and Expenses.

Loans Treated as Distributions

If you borrow money from your retirement plan, you must 

treat the loan as a nonperiodic distribution from the plan 

unless it qualifies for the exception to this loan-as-distribution rule explained later. This treatment also applies to any 

loan under a contract purchased under your retirement 

plan, and to the value of any part of your interest in the 

plan or contract that you pledge or assign (or agree to 

pledge or assign). It applies to loans from both qualified 

and nonqualified plans, including commercial annuity contracts you purchase directly from the issuer. Further, it applies if you renegotiate, extend, renew, or revise a loan 

that qualified for the exception below if the altered loan 

doesn't qualify. In that situation, you must treat the outstanding balance of the loan as a distribution on the date 

of the transaction.

You determine how much of the loan is taxable using 

the allocation rules for nonperiodic distributions discussed 

under Figuring the Taxable Amount, earlier. The taxable 

part may be subject to the additional tax on early distributions. It isn't an eligible rollover distribution and doesn't 

qualify for the 10-year tax option.

Exception for qualified plan, 403(b) plan, and governmental plan loans. At least part of certain loans under a 

qualified employee plan, qualified employee annuity, 

tax-sheltered annuity (403(b) plan), or governmental plan 

isn't treated as a distribution from the plan. This exception 

to the loan-as-distribution rule applies only to a loan that 

either:

• Is used to acquire your main home, or

• Must be repaid within 5 years.

If a loan qualifies for this exception, you must treat it as 

a nonperiodic distribution only to the extent that the loan, 

when added to the outstanding balances of all your loans 

from all plans of your employer (and certain related employers, defined later), exceeds the lesser of:

• $50,000; or

• Half the present value (but not less than $10,000) of 

your nonforfeitable accrued benefit under the plan, determined without regard to any accumulated deductible employee contributions.

You must reduce the $50,000 amount if you already 

had an outstanding loan from the plan during the 1-year 

period ending the day before you took out the loan. The 

amount of the reduction is your highest outstanding loan 

balance during that period minus the outstanding balance 

on the date you took out the new loan. If this amount is 

zero or less, ignore it.

18 Publication 575 (2023)
Substantially level payments. To qualify for the exception to the loan-as-distribution rule, the loan must require substantially level payments at least quarterly over 

the life of the loan. If the loan is from a designated Roth 

account, the payments must be satisfied separately for 

that part of the loan and for the part of the loan from other 

accounts under the plan. This level payment requirement 

doesn't apply to the period in which you are on a leave of 

absence without pay or with a rate of pay that is less than 

the required installment. Generally, this leave of absence 

must not be longer than 1 year. You must repay the loan 

within 5 years from the date of the loan (unless the loan 

was used to acquire your main home). Your installment 

payments after the leave ends must not be less than your 

original payments.

However, if your plan suspends your loan payments for 

any part of the period during which you are in the uniformed services, you won't be treated as having received 

a distribution even if the suspension is for more than 1 

year and the term of the loan is extended. The loan payments must resume upon completion of such period and 

the loan must be repaid in substantially level installments 

within 5 years from the date of the loan (unless the loan 

was used to acquire your main home) plus the period of 

suspension.

Example 1. On May 1, 2023, you borrowed $40,000 

from your retirement plan. The loan was to be repaid in 

level monthly installments over 5 years. The loan wasn't 

used to acquire your main home. You make nine monthly 

payments and start an unpaid leave of absence that lasts 

for 12 months. You weren't in the uniformed services during this period. After the leave period ends and you resume active employment, you resume making repayments 

on the loan. You must repay this loan by April 30, 2028 (5 

years from the date of this loan). You can increase your 

monthly installments or you can make the original monthly 

installments and on April 30, 2028, pay the balance.

Example 2. The facts are the same as in Example 1, 

except that you are on a leave of absence performing 

service in the uniformed services for 2 years. The loan 

payments were suspended for that period. You must resume making loan payments at the end of that period and 

the loan must be repaid by April 30, 2030 (5 years from 

the date of the loan plus the period of suspension, which 

is 2 years in this example).

Related employers and related plans. In determining loan balances for purposes of applying the exception 

to the loan-as-distribution rule, you must add the balances 

of all your loans from all plans of your employer and from 

all plans of your employers who are treated as a single 

employer. Treat separate employers' plans as plans of a 

single employer if they are treated that way under other 

qualified retirement plan rules because the employers are 

related.

Employers are related if they are:

• Members of a controlled group of corporations,

• Businesses under common control, or

• Members of an affiliated service group.

An affiliated service group is generally two or more 

service organizations whose relationship involves an ownership connection. Their relationship also includes the 

regular or significant performance of services by one organization for or in association with another.

Denial of interest deduction. If the loan from a qualified plan isn't treated as a distribution because the exception applies, you can't deduct any of the interest on the 

loan during any period that:

• The loan is secured by amounts from elective deferrals under a qualified cash or deferred arrangement 

(section 401(k) plan) or a salary reduction agreement 

to purchase a tax-sheltered annuity, or

• You are a key employee as defined in section 416(i) of 

the Internal Revenue Code.

Reporting by plan. If your loan is treated as a distribution (deemed distribution), you should receive a Form 

1099-R showing code “L” in box 7. If your loan is treated 

as a qualified plan loan offset, you should receive a Form 

1099-R showing code “M” in box 7. If your loan is not a 

qualified plan loan offset, no code will be reported on 

Form 1099-R for the offset.

Effect on investment in the contract. If your loan is 

treated as a distribution, you must reduce your investment 

in the contract to the extent that the distribution is tax free 

under the allocation rules for qualified plans, explained 

earlier. Repayments of the loan increase your investment 

in the contract to the extent that the distribution is taxable 

under those rules.

If you receive a loan under a nonqualified plan other 

than a 403(b) plan, including a commercial annuity contract that you purchase directly from the issuer, you increase your investment in the contract to the extent that 

the distribution is taxable under the general allocation rule 

for nonqualified plans, explained earlier. Repayments of 

the loan don't affect your investment in the contract. However, if the distribution is excepted from the general allocation rule (for example, because it is made under a contract 

entered into before August 14, 1982), you reduce your investment in the contract to the extent that the distribution 

is tax free and increase it for loan repayments to the extent 

that the distribution is taxable.

Transfers of Annuity Contracts

If you transfer without full and adequate consideration an 

annuity contract issued after April 22, 1987, you are treated as receiving a nonperiodic distribution. The distribution equals the excess of:

• The cash surrender value of the contract at the time of 

transfer, over

• Your investment in the contract at that time.

This rule doesn't apply to transfers between spouses or 

transfers between former spouses incident to a divorce.

Tax-free exchange. No gain or loss is recognized on an 

exchange of an annuity contract for another annuity 

Publication 575 (2023) 19
contract if the insured or annuitant remains the same. 

However, if an annuity contract is exchanged for a life insurance or endowment contract, any gain due to interest 

accumulated on the contract is ordinary income.

If you transfer a full or partial interest in a tax-sheltered 

annuity that isn't subject to restrictions on early distributions to another tax-sheltered annuity, the transfer qualifies for nonrecognition of gain or loss.

If you exchange an annuity contract issued by a life insurance company that is subject to a rehabilitation, conservatorship, or similar state proceeding for an annuity 

contract issued by another life insurance company, the exchange qualifies for nonrecognition of gain or loss. The 

exchange is tax free even if the new contract is funded by 

two or more payments from the old annuity contract. This 

also applies to an exchange of a life insurance contract for 

a life insurance, endowment, annuity, or qualified 

long-term care insurance contract.

If you transfer part of the cash surrender value of an existing annuity contract for a new annuity contract issued by 

another insurance company, the transfer qualifies for nonrecognition of gain or loss. The funds must be transferred 

directly between the insurance companies. Your investment in the original contract immediately before the exchange is allocated between the contracts based on the 

percentage of the cash surrender value allocated to each 

contract.

Example. You own an annuity contract issued by ABC 

Insurance. You assign 60% of the cash surrender value of 

that contract to DEF Insurance to purchase an annuity 

contract. The funds are transferred directly between the 

insurance companies. You don't recognize any gain or 

loss on the transaction. After the exchange, your investment in the new contract is equal to 60% of your investment in the old contract immediately before the exchange. 

Your investment in the old contract is equal to 40% of your 

original investment in that contract.

Tax-free transfers for certain cash distributions. If 

you receive cash from the surrender of one contract and 

invest the cash in another contract, you generally don't 

have a tax-free transfer. However, you can elect to receive 

tax-free treatment for a cash distribution from an insurance company that is subject to a rehabilitation, conservatorship, insolvency, or similar state proceeding if all of the 

following conditions are met.

• You withdraw all the cash to which you are entitled.

• You reinvest the proceeds within 60 days in a single 

contract issued by another insurance company.

• You assign all rights to any future distributions to the 

new issuer if the cash distribution is restricted by the 

state proceeding to an amount that is less than required for full settlement.

• An exchange of these contracts would otherwise qualify as a tax-free transfer.

You must give the new issuer a statement containing 

the following information.

• The amount of cash distributed under the old contract.

• The amount of cash reinvested in the new contract.

• Your investment in the old contract on the date of the 

initial distribution.

You must also attach the following items to your timely 

filed income tax return for the year of the initial distribution.

• A copy of the statement you gave to the new issuer.

• A statement that contains the words “ELECTION UNDER REV. PROC. 92-44,” the new issuer's name, and 

the policy number or similar identifying information for 

the new contract.

Tax-free exchange reported on Form 1099-R. If you 

make a tax-free exchange of an annuity contract for another annuity contract issued by a different company, the 

exchange will be shown on Form 1099-R with code “6” in 

box 7. You need not report this on your tax return.

Date of purchase of contract received in a tax-free 

exchange. If you acquire an annuity contract in a tax-free 

exchange for another annuity contract, its date of purchase is the date you purchased the annuity you exchanged. This rule applies for determining if the annuity 

qualifies for exemption from the tax on early distributions 

as an immediate annuity. See Tax on Early Distributions, 

later.

Lump-Sum Distributions

This section on lump-sum distributions only applies if the plan participant was born before January 2, 1936. If the plan participant was born after 

January 1, 1936, the taxable amount of this nonperiodic 

payment is reported as discussed earlier.

A lump-sum distribution is the distribution or payment in 

1 tax year of a plan participant's entire balance from all of 

the employer's qualified plans of one kind (for example, 

pension, profit-sharing, or stock bonus plans). Additionally, a lump-sum distribution is a distribution that was paid:

• Because of the plan participant's death;

• After the participant reaches age 591/2;

• Because the participant, if an employee, separates 

from service; or

• After the participant, if a self-employed individual, becomes totally and permanently disabled.

A distribution from a nonqualified plan (such as a privately 

purchased commercial annuity or a section 457 deferred 

compensation plan of a state or local government or 

tax-exempt organization) can't qualify as a lump-sum distribution.

The participant's entire balance from a plan doesn't include certain forfeited amounts. It also doesn't include any 

deductible voluntary employee contributions allowed by 

the plan after 1981 and before 1987.

If you receive a lump-sum distribution from a qualified 

employee plan or qualified employee annuity and the plan 

participant was born before January 2, 1936, you may be 

TIP

20 Publication 575 (2023)
able to elect optional methods of figuring the tax on the 

distribution. The part from active participation in the plan 

before 1974 may qualify as capital gain subject to a 20% 

tax rate. The part from participation after 1973 (and any 

part from participation before 1974 that you don't report as 

capital gain) is ordinary income. You may be able to use 

the 10-year tax option, discussed later, to figure tax on the 

ordinary income part.

Each individual, estate, or trust who receives part of a 

lump-sum distribution on behalf of a plan participant who 

was born before January 2, 1936, can choose whether to 

elect the optional methods for the part each received. 

However, if two or more trusts receive the distribution, the 

plan participant or the personal representative of a deceased participant must make the choice.

Use Form 4972 to figure the separate tax on a 

lump-sum distribution using the optional methods. The tax 

figured on Form 4972 is added to the regular tax figured 

on your other income. This may result in a smaller tax than 

you would pay by including the taxable amount of the distribution as ordinary income in figuring your regular tax.

Alternate payee under qualified domestic relations 

order. If you receive a distribution as an alternate payee 

under a qualified domestic relations order (discussed earlier under General Information), you may be able to 

choose the optional tax computations for it. You can make 

this choice for a distribution that would be treated as a 

lump-sum distribution had it been received by your spouse 

or former spouse (the plan participant). However, for this 

purpose, the balance to your credit doesn't include any 

amount payable to the plan participant.

If you choose an optional tax computation for a distribution received as an alternate payee, this choice won't affect any election for distributions from your own plan.

More than one recipient. One or all of the recipients of a 

lump-sum distribution can use the optional tax computations. See Multiple recipients of a lump-sum distribution in 

the instructions for Form 4972.

Reemployment. A separated employee's vested percentage in their retirement benefit may increase if they are 

rehired by the employer within 5 years following separation from service. This possibility doesn't prevent a distribution made before reemployment from qualifying as a 

lump-sum distribution. However, if the employee elected 

an optional method of figuring the tax on the distribution 

and their vested percentage in the previous retirement 

benefit increases after reemployment, the employee must 

recapture the tax saved. This is done by increasing the tax 

for the year in which the increase in vesting first occurs.

Distributions that don't qualify. The following distributions don't qualify as lump-sum distributions for the capital 

gain treatment or 10-year tax option.

• The part of a distribution not rolled over if the distribution is partially rolled over to another qualified plan or 

an IRA.

• Any distribution if an earlier election to use either the 

5- or 10-year tax option had been made after 1986 for 

the same plan participant.

• U.S. Retirement Plan Bonds distributed with a lump 

sum.

• Any distribution made during the first 5 tax years that 

the participant was in the plan, unless it was made because the participant died.

• The current actuarial value of any annuity contract included in the lump sum. (Box 8 of Form 1099-R 

should show this amount, which you use only to figure 

tax on the ordinary income part of the distribution.)

• Any distribution to a 5% owner that is subject to penalties under section 72(m)(5)(A) of the Internal Revenue 

Code.

• A distribution from an IRA.

• A distribution from a tax-sheltered annuity (section 

403(b) plan).

• A distribution of the redemption proceeds of bonds 

rolled over tax free to a qualified pension plan, etc., 

from a qualified bond purchase plan.

• A distribution from a qualified plan if the participant or 

their surviving spouse previously received an eligible 

rollover distribution from the same plan (or another 

plan of the employer that must be combined with that 

plan for the lump-sum distribution rules) and the previous distribution was rolled over tax free to another 

qualified plan or an IRA.

• A distribution from a qualified plan that received a rollover after 2001 from an IRA (other than a conduit 

IRA), a governmental section 457(b) plan, or a section 

403(b) tax-sheltered annuity on behalf of the plan participant.

• A distribution from a qualified plan that received a rollover after 2001 from another qualified plan on behalf 

of that plan participant's surviving spouse.

• A corrective distribution of excess deferrals, excess 

contributions, excess aggregate contributions, or excess annual additions.

• A lump-sum credit or payment from the CSRS (or the 

FERS).

How to treat the distribution. If you receive a lump-sum 

distribution, you may have the following options for how to 

treat the taxable part.

• Report the part of the distribution from participation 

before 1974 as a capital gain (if you qualify) and the 

part from participation after 1973 as ordinary income.

• Report the part of the distribution from participation 

before 1974 as a capital gain (if you qualify) and use 

the 10-year tax option to figure the tax on the part from 

participation after 1973 (if you qualify).

• Use the 10-year tax option to figure the tax on the total 

taxable amount (if you qualify).

Publication 575 (2023) 21
• Roll over all or part of the distribution. See Rollovers, 

later. No tax is currently due on the part rolled over. 

Report any part not rolled over as ordinary income.

• Report the entire taxable part of the distribution as ordinary income on your tax return.

The first three options are explained in the following 

discussions.

Electing optional lump-sum treatment. You can 

choose to use the 10-year tax option or capital gain treatment only once after 1986 for any plan participant. If you 

make this choice, you can't use either of these optional 

treatments for any future distributions for the participant.

Complete Form 4972 and attach it to your Form 1040 or 

1040-SR if you choose to use one or both of the tax options. If you received more than one lump-sum distribution 

for a plan participant during the year, you must add them 

together in your computation. If you and your spouse are 

filing a joint return and you both have received a lump-sum 

distribution, each of you should complete a separate Form 

4972.

Time for choosing. You must decide to use the tax 

options before the end of the time, including extensions, 

for making a claim for credit or refund of tax. This is usually 3 years after the date the return was filed or 2 years 

after the date the tax was paid, whichever is later. (Returns filed before their due dates are considered filed on 

their due dates.)

Changing your mind. You can change your mind and 

decide not to use the tax options within the time period 

just discussed. If you change your mind, file Form 1040-X, 

Amended U.S. Individual Income Tax Return, with a statement saying you don't want to use the optional lump-sum 

treatment. Generally, you must pay any additional tax due 

to the change with the Form 1040-X.

How to report. If you elect capital gain treatment (but 

not the 10-year tax option) for a lump-sum distribution, include the ordinary income part of the distribution on Form 

1040, 1040-SR, or 1040-NR, lines 5a and 5b. Enter the 

capital gain part of the distribution in Part II of Form 4972. 

Include the tax from Form 4972, line 7, in the total on Form 

1040, 1040-SR, or 1040-NR, line 16.

If you elect the 10-year tax option, don't include any 

part of the distribution on Form 1040, 1040-SR, or 

1040-NR, lines 5a and 5b. Report the entire distribution in 

Part III of Form 4972 or, if you also elect capital gain treatment, report the capital gain part in Part II and the ordinary 

income part in Part III. Include the tax from Form 4972, 

line 30, in the total on Form 1040, 1040-SR, or 1040-NR, 

line 16.

Taxable and tax-free parts of the distribution. The 

taxable part of a lump-sum distribution is the employer's 

contributions and income earned on your account. You 

may recover your cost in the lump sum and any NUA in 

employer securities tax free.

Cost. In general, your cost is the total of:

• The plan participant's nondeductible contributions to 

the plan,

• The plan participant's taxable costs of any life insurance contract distributed,

• Any employer contributions that were taxable to the 

plan participant, and

• Repayments of any loans that were taxable to the plan 

participant.

You must reduce this cost by amounts previously distributed tax free.

Net unrealized appreciation (NUA). The NUA in employer securities (box 6 of Form 1099-R) received as part 

of a lump-sum distribution is generally tax free until you 

sell or exchange the securities. (See Distributions of employer securities under Figuring the Taxable Amount, earlier.) However, if you choose to include the NUA in your income for the year of the distribution and there is an 

amount in box 3 of Form 1099-R, part of the NUA will qualify for capital gain treatment. Use the NUA Worksheet in 

the Instructions for Form 4972 to find the part that qualifies.

Losses. You may be able to claim a loss on your return if 

you receive a lump-sum distribution that is less than the 

plan participant's cost. You must receive the distribution 

entirely in cash or worthless securities. The amount you 

can claim is the difference between the participant's cost 

and the amount of the cash distribution, if any.

However, for tax years 2018 through 2025, miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit are suspended and therefore not 

deductible on Schedule A (Form 1040).

A loss under a nonqualified plan, such as a commercial variable annuity, is deductible in the same 

manner as a lump-sum distribution.

Capital Gain Treatment

Capital gain treatment applies only to the taxable part of a 

lump-sum distribution resulting from participation in the 

plan before 1974. The amount treated as capital gain is 

taxed at a 20% rate. You can elect this treatment only 

once for any plan participant, and only if the plan participant was born before January 2, 1936.

Complete Part II of Form 4972 to choose the 20% capital gain election.

Figuring the capital gain and ordinary income parts. 

Generally, figure the capital gain and ordinary income 

parts of a lump-sum distribution by using the following formulas.

TIP

22 Publication 575 (2023)
 Capital Gain: 

Total Taxable 

Amount ×

Months of active participation before 1974

Total months of active participation

Ordinary Income:

Total Taxable 

Amount ×

Months of active participation after 1973

Total months of active participation

In figuring the months of active participation before 

1974, count as 12 months any part of a calendar year in 

which the plan participant actively participated under the 

plan. For active participation after 1973, count as 1 month 

any part of a calendar month in which the participant actively participated in the plan.

The capital gain part should be shown in box 3 of Form 

1099-R or other statement given to you by the payer of the 

distribution.

Reduction for federal estate tax. If any federal estate tax (discussed under Survivors and Beneficiaries, 

later) was paid on the lump-sum distribution, you must decrease the capital gain by the amount of estate tax applicable to it. Follow the Form 4972 instructions for Part II, 

line 6, to figure the part of the estate tax applicable to the 

capital gain that is used to reduce the capital gain. If you 

don't make the capital gain election, enter on line 18 of 

Part III the estate tax attributable to the total lump-sum distribution. For information on how to figure the estate tax attributable to the lump-sum distribution, see the Instructions for Form 706, United States Estate (and 

Generation-Skipping Transfer) Tax Return, or contact the 

administrator of the decedent's estate.

10-Year Tax Option

The 10-year tax option is a special formula used to figure 

a separate tax on the ordinary income part of a lump-sum 

distribution. You pay the tax only once, for the year in 

which you receive the distribution, not over the next 10 

years. You can elect this treatment only once for any plan 

participant, and only if the plan participant was born before January 2, 1936.

The ordinary income part of the distribution is the 

amount shown in box 2a of the Form 1099-R given to you 

by the payer, minus the amount, if any, shown in box 3. 

You can also treat the capital gain part of the distribution 

(box 3 of Form 1099-R) as ordinary income for the 10-year 

tax option if you don't choose capital gain treatment for 

that part.

Complete Part III of Form 4972 to choose the 10-year 

tax option. You must use the special Tax Rate Schedule 

shown in the instructions for Part III to figure the tax.

Examples

The following examples show how to figure the separate 

tax on Form 4972.

Example 1. Robert C. Smith, who was born in 1935, 

retired from Crabtree Corporation in 2023. He withdrew 

the entire amount to his credit from the company's qualified pension plan. In December 2023, he received a total 

distribution of $175,000 (the $25,000 tax-free part of the 

distribution consisting of employee contributions plus the 

$150,000 taxable part of the distribution consisting of employer contributions and earnings on all contributions).

The payer gave Robert a Form 1099-R (shown below), 

which shows the capital gain part of the taxable distribution (the part attributable to participation before 1974) to 

be $10,000. Robert elects 20% capital gain treatment for 

this part. He enters $10,000 on Form 4972, line 6, and 

$2,000 ($10,000 × 20% (0.20)) on line 7.

The ordinary income part of the taxable distribution is 

$140,000 ($150,000 – $10,000). Robert elects to figure 

the tax on this part using the 10-year tax option. He enters 

$140,000 on Form 4972, line 8. Then, he completes the 

rest of Form 4972 and includes the tax of $24,270 in the 

total on Form 1040, 1040-SR, or 1040-NR, line 16. See 

Robert’s filled-in Form 4972, later.

Publication 575 (2023) 23
 

Form 1099-R

2023

Distributions From 

Pensions, Annuities,

Retirement or 

Profit-Sharing Plans, 

IRAs, Insurance 

Contracts, etc.

Department of the Treasury - Internal Revenue Service

Copy B 

Report this 

income on your 

federal tax 

return. If this 

form shows 

federal income 

tax withheld in 

box 4, attach 

this copy to 

your return. 

This information is 

being furnished to 

the IRS.

OMB No. 1545-0119

CORRECTED (if checked)

PAYER’S name, street address, city or town, state or province, 

country, ZIP or foreign postal code, and telephone no.

PAYER’S TIN RECIPIENT’S TIN

RECIPIENT’S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

1 Gross distribution

$

2a Taxable amount

$

2b Taxable amount

not determined

Total 

distribution

3 Capital gain (included in 

box 2a)

$

4 Federal income tax 

withheld

$

5 Employee contributions/

Designated Roth

contributions or 

insurance premiums

$

6 Net unrealized

appreciation in

employer’s securities

$

7 Distribution 

code(s)

IRA/

SEP/

SIMPLE

8 Other

$ %

9a Your percentage of total

distribution %

9b Total employee contributions

$

10 Amount allocable to IRR 

within 5 years

$

11 1st year of desig. 

Roth contrib.

12 FATCA ling

requirement

13 Date of 

payment 

14 State tax withheld

$

$

15 State/Payer’s state no. 16 State distribution

$

$

17 Local tax withheld

$

$

18 Name of locality 19 Local distribution

$

$

Form 1099-R www.irs.gov/Form1099R

Crabtree Corporation Employees’ Pension Plan

1111 Main Street

Anytown, Texas 75000

10-0000000 002-00-XXXX

Robert C. Smith

911 Mill Way

Anytown, Texas 75000

175000.00

150000.00

X

10000.00 30000.00

25000.00

7A

24 Publication 575 (2023)
Robert C. Smith 002-00-XXXX

√

√

√

√

√

10,000

2,000

140,000

140,000

-0-

140,000

140,000

140,000

14,000

2,227

22,270

22,270

24,270

Form 4972 2023

Tax on Lump-Sum Distributions 

(From Qualified Plans of Participants Born Before January 2, 1936)

Department of the Treasury 

Internal Revenue Service 

Attach to Form 1040, 1040-SR, 1040-NR, or 1041. 

Go to www.irs.gov/Form4972 for the latest information.

OMB No. 1545-0193

Attachment 

Sequence No. 28

Name of recipient of distribution Identifying number

Part I Complete this part to see if you can use Form 4972

1 Was this a distribution of a plan participant’s entire balance (excluding deductible voluntary employee 

contributions and certain forfeited amounts) from all of an employer’s qualied plans of one kind (for 

example, pension, prot-sharing, or stock bonus)? If “No,” don’t use this form . . . . . . . . . .

Yes No

1 

2 Did you roll over any part of the distribution? If “Yes,” don’t use this form . . . . . . . . . . . 2 

3 Was this distribution paid to you as a beneciary of a plan participant who was born before January 2, 1936? 3 

4 Were you (a) a plan participant who received this distribution, (b) born before January 2, 1936, and (c) a 

participant in the plan for at least 5 years before the year of the distribution? . . . . . . . . . . 4 

If you answered “No” to both questions 3 and 4, don’t use this form.

5 a Did you use Form 4972 after 1986 for a previous distribution from your own plan? If “Yes,” don’t use this 

form for a 2023 distribution from your own plan . . . . . . . . . . . ... . . . . . . 5a 

b If you are receiving this distribution as a beneciary of a plan participant who died, did you use Form 4972 

for a previous distribution received as a beneciary of that participant after 1986? If “Yes,” don’t use this

form for this distribution . . . . . . . . . ... . . . ..... . . ..... . 5b

Part II Complete this part to choose the 20% capital gain elections (see instructions)

6 Capital gain part from Form 1099-R, box 3 . . . . . . . .... . . ..... . . 6 

7 Multiply line 6 by 20% (0.20) . . ... . . . . . . ... . . . .... . . . 7 

If you also choose to use Part III, go to line 8. Otherwise, include the amount from line 7 in the total 

on Form 1040, 1040-SR, or 1040-NR, line 16, or Form 1041, Schedule G, line 1b. Be sure to check 

box 2 on Form 1040, 1040-SR, or 1040-NR, line 16.

Part III Complete this part to choose the 10-year tax option (see instructions)

8 If you completed Part II, enter the amount from Form 1099-R, box 2a, minus box 3. If you didn’t 

complete Part II, enter the amount from box 2a. Multiple recipients (and recipients who elect to 

include net unrealized appreciation (NUA) in taxable income), see instructions . . . . . . . . 8 

9 Death benet exclusion for a beneciary of a plan participant who died before August 21, 1996 . . 9 

10 Total taxable amount. Subtract line 9 from line 8 . . . . . . . . . . . ... . . . . 10 

11 Current actuarial value of annuity from Form 1099-R, box 8. If none, enter -0- . . . . . . . . 11 

12 Adjusted total taxable amount. Add lines 10 and 11. If this amount is $70,000 or more, skip lines 13 

through 16, enter this amount on line 17, and go to line 18 . . . . . . . . . . . ... . 12 

13 Multiply line 12 by 50% (0.50), but don’t enter more than $10,000 . . . . 13 

14 Subtract $20,000 from line 12. If line 12 is $20,000 or 

less, enter -0- . . ... . . . ... . . 14 

15 Multiply line 14 by 20% (0.20) . . ... . . . . . . ... . . 15 

16 Minimum distribution allowance. Subtract line 15 from line 13 . . . . . . . . . . . . . 16 

17 Subtract line 16 from line 12 . . . . . . ... . . . .... . . . ..... . 17 

18 Federal estate tax attributable to lump-sum distribution . . . . . . . . . . . ... . 18 

19 Subtract line 18 from line 17. If line 11 is zero, skip lines 20 through 22 and go to line 23 . . . . 19 

20 Divide line 11 by line 12 and enter the result as a decimal (rounded to at least 

three places) . . . . . . . . . . . . .... . . . . . . 20 .

21 Multiply line 16 by the decimal on line 20 . . . . . . . .... . 21 

22 Subtract line 21 from line 11 . . ... . . . . . . ... . . 22 

23 Multiply line 19 by 10% (0.10) . . ... . . . . . . ... . . . .... . . . 23 

24 Tax on amount on line 23. Use the Tax Rate Schedule in the instructions . . . . . . . . . . 24 

25 Multiply line 24 by 10.0. If line 11 is zero, skip lines 26 through 28, enter this amount on line 29, and 

go to line 30 . . . . . . . . . . . . . . . ..... . . ....... . 25 

26 Multiply line 22 by 10% (0.10) . . ... . . . . . . ... . . 26 

27 Tax on amount on line 26. Use the Tax Rate Schedule in the instructions . . 27 

28 Multiply line 27 by 10.0 . . ... . . . ... . . ..... . . . .... . 28 

29 Subtract line 28 from line 25. Multiple recipients, see instructions . . . . . . . . . . . . 29 

30 Tax on lump-sum distribution. Add lines 7 and 29. Also, include this amount in the total on Form

1040, 1040-SR, or 1040-NR, line 16 (check box 2), or Form 1041, Schedule G, line 1b . . . . . 30 

For Paperwork Reduction Act Notice, see instructions. Cat. No. 13187U Form 4972 (2023)

Publication 575 (2023) 25
Example 2. Mary Brown, who was born in 1935, sold 

her business in 2023. She withdrew her entire interest in 

the qualified profit-sharing plan she had set up as the sole 

proprietor.

The cash part of the distribution, $160,000, is all ordinary income and is shown on her Form 1099-R below. 

She chooses to figure the tax on this amount using the 

10-year tax option. Mary also received an annuity contract 

as part of the distribution from the plan. Box 8 of Form 

1099-R shows that the current actuarial value of the annuity is $10,000. She enters these figures on Form 4972

(shown later).

After completing Form 4972, she includes the tax of 

$28,070 in the total on Form 1040, 1040-SR, or 1040-NR, 

line 16.

Form 1099-R

2023

Distributions From 

Pensions, Annuities,

Retirement or 

Profit-Sharing Plans, 

IRAs, Insurance 

Contracts, etc.

Department of the Treasury - Internal Revenue Service

Copy B 

Report this 

income on your 

federal tax 

return. If this 

form shows 

federal income 

tax withheld in 

box 4, attach 

this copy to 

your return. 

This information is 

being furnished to 

the IRS.

OMB No. 1545-0119

CORRECTED (if checked)

PAYER’S name, street address, city or town, state or province, 

country, ZIP or foreign postal code, and telephone no.

PAYER’S TIN RECIPIENT’S TIN

RECIPIENT’S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

1 Gross distribution

$

2a Taxable amount

$

2b Taxable amount

not determined

Total 

distribution

3 Capital gain (included in 

box 2a)

$

4 Federal income tax 

withheld

$

5 Employee contributions/

Designated Roth

contributions or 

insurance premiums

$

6 Net unrealized

appreciation in

employer’s securities

$

7 Distribution 

code(s)

IRA/

SEP/

SIMPLE

8 Other

$ %

9a Your percentage of total

distribution %

9b Total employee contributions

$

10 Amount allocable to IRR 

within 5 years

$

11 1st year of desig. 

Roth contrib.

12 FATCA ling

requirement

13 Date of 

payment 

14 State tax withheld

$

$

15 State/Payer’s state no. 16 State distribution

$

$

17 Local tax withheld

$

$

18 Name of locality 19 Local distribution

$

$

Form 1099-R www.irs.gov/Form1099R

160000.00

160000.00

32000.00 10-0000000 005-00-XXXX

Mary Brown

12 Mill Avenue

Anytown, Nevada 89300

25000.00

7A 10000.00

X

Brown’s Real Estate

Profit-Sharing Plan

2101 Chelsea Court

Anytown, Nevada 89300

26 Publication 575 (2023)
Mary Brown 005-00-XXXX

√

√

√

√

√

160,000

160,000

10,000

170,000

170,000

170,000

17,000

2,917

29,170

28,070

28,070

0588

10,000

1,000

110

1,100

Form 4972 2023

Tax on Lump-Sum Distributions 

(From Qualified Plans of Participants Born Before January 2, 1936)

Department of the Treasury 

Internal Revenue Service 

Attach to Form 1040, 1040-SR, 1040-NR, or 1041. 

Go to www.irs.gov/Form4972 for the latest information.

OMB No. 1545-0193

Attachment 

Sequence No. 28

Name of recipient of distribution Identifying number

Part I Complete this part to see if you can use Form 4972

1 Was this a distribution of a plan participant’s entire balance (excluding deductible voluntary employee 

contributions and certain forfeited amounts) from all of an employer’s qualied plans of one kind (for 

example, pension, prot-sharing, or stock bonus)? If “No,” don’t use this form . . . . . . . . . .

Yes No

1 

2 Did you roll over any part of the distribution? If “Yes,” don’t use this form . . . . . . . . . . . 2 

3 Was this distribution paid to you as a beneciary of a plan participant who was born before January 2, 1936? 3 

4 Were you (a) a plan participant who received this distribution, (b) born before January 2, 1936, and (c) a 

participant in the plan for at least 5 years before the year of the distribution? . . . . . . . . . . 4 

If you answered “No” to both questions 3 and 4, don’t use this form.

5 a Did you use Form 4972 after 1986 for a previous distribution from your own plan? If “Yes,” don’t use this 

form for a 2023 distribution from your own plan . . . . . . . . . . . ... . . . . . . 5a 

b If you are receiving this distribution as a beneciary of a plan participant who died, did you use Form 4972 

for a previous distribution received as a beneciary of that participant after 1986? If “Yes,” don’t use this

form for this distribution . . . . . . . . . ... . . . ..... . . ..... . 5b

Part II Complete this part to choose the 20% capital gain elections (see instructions)

6 Capital gain part from Form 1099-R, box 3 . . . . . . . .... . . ..... . . 6 

7 Multiply line 6 by 20% (0.20) . . ... . . . . . . ... . . . .... . . . 7 

If you also choose to use Part III, go to line 8. Otherwise, include the amount from line 7 in the total 

on Form 1040, 1040-SR, or 1040-NR, line 16, or Form 1041, Schedule G, line 1b. Be sure to check 

box 2 on Form 1040, 1040-SR, or 1040-NR, line 16.

Part III Complete this part to choose the 10-year tax option (see instructions)

8 If you completed Part II, enter the amount from Form 1099-R, box 2a, minus box 3. If you didn’t 

complete Part II, enter the amount from box 2a. Multiple recipients (and recipients who elect to 

include net unrealized appreciation (NUA) in taxable income), see instructions . . . . . . . . 8 

9 Death benet exclusion for a beneciary of a plan participant who died before August 21, 1996 . . 9 

10 Total taxable amount. Subtract line 9 from line 8 . . . . . . . . . . . ... . . . . 10 

11 Current actuarial value of annuity from Form 1099-R, box 8. If none, enter -0- . . . . . . . . 11 

12 Adjusted total taxable amount. Add lines 10 and 11. If this amount is $70,000 or more, skip lines 13 

through 16, enter this amount on line 17, and go to line 18 . . . . . . . . . . . ... . 12 

13 Multiply line 12 by 50% (0.50), but don’t enter more than $10,000 . . . . 13 

14 Subtract $20,000 from line 12. If line 12 is $20,000 or 

less, enter -0- . . ... . . . ... . . 14 

15 Multiply line 14 by 20% (0.20) . . ... . . . . . . ... . . 15 

16 Minimum distribution allowance. Subtract line 15 from line 13 . . . . . . . . . . . . . 16 

17 Subtract line 16 from line 12 . . . . . . ... . . . .... . . . ..... . 17 

18 Federal estate tax attributable to lump-sum distribution . . . . . . . . . . . ... . 18 

19 Subtract line 18 from line 17. If line 11 is zero, skip lines 20 through 22 and go to line 23 . . . . 19 

20 Divide line 11 by line 12 and enter the result as a decimal (rounded to at least 

three places) . . . . . . . . . . . . .... . . . . . . 20 .

21 Multiply line 16 by the decimal on line 20 . . . . . . . .... . 21 

22 Subtract line 21 from line 11 . . ... . . . . . . ... . . 22 

23 Multiply line 19 by 10% (0.10) . . ... . . . . . . ... . . . .... . . . 23 

24 Tax on amount on line 23. Use the Tax Rate Schedule in the instructions . . . . . . . . . . 24 

25 Multiply line 24 by 10.0. If line 11 is zero, skip lines 26 through 28, enter this amount on line 29, and 

go to line 30 . . . . . . . . . . . . . . . ..... . . ....... . 25 

26 Multiply line 22 by 10% (0.10) . . ... . . . . . . ... . . 26 

27 Tax on amount on line 26. Use the Tax Rate Schedule in the instructions . . 27 

28 Multiply line 27 by 10.0 . . ... . . . ... . . ..... . . . .... . 28 

29 Subtract line 28 from line 25. Multiple recipients, see instructions . . . . . . . . . . . . 29 

30 Tax on lump-sum distribution. Add lines 7 and 29. Also, include this amount in the total on Form

1040, 1040-SR, or 1040-NR, line 16 (check box 2), or Form 1041, Schedule G, line 1b . . . . . 30 

For Paperwork Reduction Act Notice, see instructions. Cat. No. 13187U Form 4972 (2023)

Publication 575 (2023) 27
Rollovers

If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can generally defer tax on the distribution by rolling it over to another qualified retirement plan, a traditional IRA, or, after 2 

years of participation in a SIMPLE IRA sponsored by your 

employer, a SIMPLE IRA under that plan. You don't include the amount rolled over in your income until you receive it in a distribution from the recipient plan or IRA without rolling over that distribution. (For information about 

rollovers from traditional IRAs, see chapter 1 of Pub. 

590-A.)

If you roll over the distribution to a traditional IRA, you 

can't deduct the amount rolled over as an IRA contribution. When you later withdraw it from the IRA, you can't 

use the optional methods discussed earlier under 

Lump-Sum Distributions to figure the tax.

Self-employed individuals are generally treated as employees for the rules on the tax treatment of distributions, 

including the rules for rollovers.

See Designated Roth accounts, later, for information on 

rollovers (including in-plan Roth rollovers) related to those 

accounts. Also, see Rollovers to Roth IRAs, later, for information on rollovers from a qualified retirement plan to a 

Roth IRA.

Rollovers to SIMPLE retirement accounts. You can 

also roll over amounts from a qualified retirement plan (as 

described next) or an IRA into a SIMPLE retirement account as follows.

1. During the first 2 years of participation in a SIMPLE 

retirement account, you may roll over amounts from 

one SIMPLE retirement account into another SIMPLE 

retirement account.

2. After 2 years of participation in a SIMPLE retirement 

account, you may roll over amounts from a SIMPLE 

retirement account, a qualified retirement plan, or an 

IRA into a SIMPLE retirement account.

Qualified retirement plan. For this purpose, the following plans are qualified retirement plans.

• A qualified employee plan.

• A qualified employee annuity.

• A tax-sheltered annuity plan (403(b) plan).

• An eligible state or local governmental section 457 deferred compensation plan.

Eligible rollover distribution. An eligible rollover distribution is any distribution of all or any part of the balance to 

your credit in a qualified retirement plan except the following.

1. Any of a series of substantially equal distributions 

paid at least once a year over:

a. Your lifetime or life expectancy,

b. The joint lives or life expectancies of you and your 

beneficiary, or

c. A period of 10 years or more.

2. A required minimum distribution (RMD) (discussed 

later under Tax on Excess Accumulation).

3. Hardship distributions.

4. Corrective distributions of excess contributions or excess deferrals, and any income allocable to these distributions, or of excess annual additions and any allocable gains (see Corrective distributions of excess 

plan contributions under Taxation of Nonperiodic Payments, earlier).

5. A loan treated as a distribution because it doesn’t satisfy certain requirements either when made or later 

(such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan. 

See Loans Treated as Distributions, earlier, and the 

discussion of plan loan offsets, including qualified 

plan loan offsets, under Time for making rollover, 

later.

6. Dividends paid on employer securities.

7. The cost of life insurance coverage.

In addition, a distribution to the plan participant's beneficiary isn’t generally treated as an eligible rollover distribution. However, see Qualified domestic relations order 

(QDRO), Rollover by surviving spouse, and Rollovers by 

nonspouse beneficiary, later.

Rollover of nontaxable amounts. You may be able to 

roll over the nontaxable part of a distribution (such as your 

after-tax contributions) made to another qualified retirement plan that is a qualified employee plan or a 403(b) 

plan, or to a traditional or Roth IRA. The transfer must be 

made either through a direct rollover to a qualified plan or 

403(b) plan that separately accounts for the taxable and 

nontaxable parts of the rollover or through a rollover to a 

traditional or Roth IRA.

If you roll over only part of a distribution that includes 

both taxable and nontaxable amounts, the amount you roll 

over is treated as coming first from the taxable part of the 

distribution.

Any after-tax contributions that you roll over into your 

traditional IRA become part of your basis (cost) in your 

IRAs. To recover your basis when you take distributions 

from your IRA, you must complete Form 8606, Nondeductible IRAs, for the year of the distribution. For more information, see the Instructions for Form 8606.

Withholding requirements. If an eligible rollover distribution is paid to you, the payer must withhold 20% of it. 

This applies even if you plan to roll over the distribution to 

another qualified retirement plan or to an IRA. However, 

you can avoid withholding by choosing the direct rollover 

option, discussed later. Also, see Choosing the right option at the end of this discussion.

Exceptions. An eligible rollover distribution isn't subject to withholding to the extent it consists of NUA from 

28 Publication 575 (2023)
employer securities that can be excluded from your gross 

income. (For a discussion of the tax treatment of a distribution of employer securities, see Figuring the Taxable 

Amount under Taxation of Nonperiodic Payments, earlier.)

In addition, withholding from an eligible rollover distribution paid to you isn't required if:

• The distribution and all previous eligible rollover distributions you received during the tax year from the 

same plan (or, at the payer's option, from all your employer's plans) total less than $200; or

• The distribution consists solely of employer securities, 

plus cash of $200 or less instead of fractional shares.

Direct rollover option. You can choose to have any part 

or all of an eligible rollover distribution paid directly to another qualified retirement plan that accepts rollover distributions or to a traditional or Roth IRA.

There is an automatic rollover requirement for mandatory distributions. A mandatory distribution is a distribution 

made without your consent and before you reach age 62 

or normal retirement age, whichever is later. The automatic rollover requirement applies if the distribution is 

more than $1,000 and is an eligible rollover distribution. 

You can choose to have the distribution paid directly to 

you or rolled over directly to your traditional or Roth IRA or 

another qualified retirement plan. If you don't make this 

choice, the plan administrator will automatically roll over 

the distribution into an IRA of a designated trustee or issuer.

No tax withheld. If you choose the direct rollover option, or have an automatic rollover, no tax will be withheld 

from any part of the distribution that is directly paid to the 

trustee of the other plan. If any part of the eligible rollover 

distribution is paid to you, the payer must generally withhold 20% of it for income tax.

Payment-to-you option. If an eligible rollover distribution 

is paid to you, 20% will generally be withheld for income 

tax. However, the full amount is treated as distributed to 

you even though you actually receive only 80%. You must 

generally include in income any part (including the part 

withheld) that you don't roll over within 60 days to another 

qualified retirement plan or to a traditional or Roth IRA.

If you are under age 591/2 when a distribution is paid to 

you, you may have to pay a 10% tax (in addition to the regular income tax) on the taxable part (including any tax 

withheld) that you don't roll over. See Tax on Early Distributions, later.

Partial rollovers. If you receive a lump-sum distribution, it may qualify for special tax treatment. See 

Lump-Sum Distributions, earlier. However, if you roll over 

any part of the distribution, the part you keep doesn't qualify for special tax treatment.

Rolling over more than amount received. If 

you decide to roll over an amount equal to the distribution before withholding, your contribution to 

the new plan or IRA must include other money (for example, from savings or amounts borrowed) to replace the 

amount withheld.

CAUTION

!

Example. You receive an eligible rollover distribution of 

$10,000 from your employer's qualified employee plan. 

The payer withholds $2,000, so you actually receive 

$8,000. If you want to roll over the entire $10,000 to postpone including that amount in your income, you will have 

to get $2,000 from some other source to add to the $8,000 

you actually received.

If you roll over only $8,000, you must include the $2,000 

not rolled over in your income for the distribution year. 

Also, you may be subject to the 10% additional tax on the 

$2,000 if it was distributed to you before you reached age 

591/2.

Time for making rollover. You must generally complete 

the rollover of an eligible rollover distribution paid to you by 

the 60th day following the day on which you receive the 

distribution from your employer's plan.

The IRS may waive the 60-day requirement where the 

failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or 

other event beyond your reasonable control.

Example. In the previous example, you received the 

distribution on June 30. To postpone including it in your income, you must complete the rollover by August 29, the 

60th day following June 30.

Plan loan offset. A plan loan offset is the amount your 

employer plan account balance is reduced, or offset, to repay a loan from the plan. How long you have to complete 

the rollover of a plan loan offset depends on what kind of 

plan loan offset you have. For tax years beginning after 

2017, if you have a qualified plan loan offset, you will have 

until the due date (including extensions) for your tax return 

for the tax year in which the offset occurs to complete your 

rollover.

A qualified plan loan offset occurs when a plan loan 

in good standing is offset because your employer plan terminates, or because you have a severance from employment. If your plan loan offset occurs for any other reason, 

then you have 60 days from the date the offset occurs to 

complete your rollover.

Ways to get a waiver of the 60-day rollover requirement. There are three ways to obtain a waiver of the 

60-day requirement.

• You qualify for an automatic waiver.

• You self-certify that you meet the requirements of a 

waiver.

• You request and receive a private letter ruling granting 

a waiver.

For more information about requesting a waiver of the 

60-day rollover requirement, rollovers permitted between 

the various types of retirement plans (including IRAs), and 

other topics regarding rollovers, see Rollovers in Pub. 

590-A.

Frozen deposits. If an amount distributed to you becomes a frozen deposit in a financial institution during the 

Publication 575 (2023) 29
60-day period after you receive it, the rollover period is extended. An amount is a frozen deposit if you can't withdraw it because of either:

• The bankruptcy or insolvency of the financial institution, or

• A restriction on withdrawals by the state in which the 

institution is located because of the bankruptcy or insolvency (or threat of it) of one or more financial institutions in the state.

The 60-day rollover period is extended by the period for 

which the amount is a frozen deposit and doesn't end earlier than 10 days after the amount is no longer a frozen deposit.

Retirement bonds. If you redeem retirement bonds purchased under a qualified bond purchase plan, you can roll 

over the proceeds that exceed your basis tax free into an 

IRA or qualified employer plan. Subsequent distributions 

of those proceeds, however, don't qualify for the 10-year 

tax option or capital gain treatment.

Annuity contracts. If an annuity contract was distributed 

to you by a qualified retirement plan, you can roll over an 

amount paid under the contract that is otherwise an eligible rollover distribution. For example, you can roll over a 

single-sum payment you receive upon surrender of the 

contract to the extent it is taxable and isn't an RMD.

Rollovers of property. To roll over an eligible rollover 

distribution of property, you must either roll over the actual 

property distributed or sell it and roll over the proceeds. 

You can't keep the distributed property and roll over cash 

or other property.

If you sell the distributed property and roll over all the 

proceeds, no gain or loss is recognized on the sale. The 

sale proceeds (including any portion representing an increase in value) are treated as part of the distribution and 

aren't included in your gross income.

If you roll over only part of the proceeds, you are taxed 

on the part you keep. You must allocate the proceeds you 

keep between the part representing ordinary income from 

the distribution (its value upon distribution) and the part 

representing gain or loss from the sale (its change in value 

from its distribution to its sale).

Example 1. On September 4, 2023, Paul received an 

eligible rollover distribution from his employer's noncontributory qualified employee plan of $50,000 in nonemployer 

stock. On September 24, 2023, he sold the stock for 

$60,000. On October 2, 2023, he contributed $60,000 

cash to a traditional IRA. Paul doesn't include either the 

$50,000 eligible rollover distribution or the $10,000 gain 

from the sale of the stock in his income. The entire 

$60,000 rolled over will be ordinary income when he withdraws it from his IRA.

Example 2. The facts are the same as in Example 1, 

except that Paul sold the stock for $40,000 and contributed $40,000 to the IRA. Paul doesn't include the $50,000 

eligible rollover distribution in his income and doesn't deduct the $10,000 loss from the sale of the stock. The 

$40,000 rolled over will be ordinary income when he withdraws it from his IRA.

Example 3. The facts are the same as in Example 1, 

except that Paul rolled over only $45,000 of the $60,000 

proceeds from the sale of the stock. The $15,000 proceeds he didn't roll over include part of the gain from the 

stock sale. Paul reports $2,500 ($10,000 ÷ $60,000 × 

$15,000) as capital gain and $12,500 ($50,000 ÷ $60,000 

× $15,000) as ordinary income.

Example 4. The facts are the same as in Example 2, 

except that Paul rolled over only $25,000 of the $40,000 

proceeds from the sale of the stock. The $15,000 proceeds he didn’t roll over include part of the loss from the 

stock sale. Paul reports $3,750 ($10,000 ÷ $40,000 × 

$15,000) capital loss and $18,750 ($50,000 ÷ $40,000 × 

$15,000) ordinary income.

Property and cash distributed. If both cash and property were distributed and you didn't roll over the entire distribution, you may designate what part of the rollover is allocable to the cash distribution and what part is allocable 

to the proceeds from the sale of the distributed property. If 

the distribution included an amount that isn’t taxable 

(other than the NUA in employer securities) as well as an 

eligible rollover distribution, you may also designate what 

part of the nontaxable amount is allocable to the cash distribution and what part is allocable to the property. Your 

designation must be made by the due date for filing your 

tax return, including extensions. You can't change your 

designation after that date. If you don't make a designation 

on time, the rollover amount or the nontaxable amount 

must be allocated on a ratable basis.

Qualified domestic relations order (QDRO). You may 

be able to roll over tax free all or part of a distribution from 

a qualified retirement plan that you receive under a 

QDRO. (See Qualified domestic relations order (QDRO) 

under General Information, earlier.) If you receive the distribution as an employee's spouse or former spouse (not 

as a nonspouse beneficiary), the rollover rules apply to 

you as if you were the employee.

Rollover by surviving spouse. You may be able to roll 

over tax free all or part of a distribution from a qualified retirement plan you receive as the surviving spouse of a deceased employee. The rollover rules apply to you as if you 

were the employee. You can roll over the distribution into a 

qualified retirement plan or a traditional or Roth IRA. For a 

rollover to a Roth IRA, see Rollovers to Roth IRAs, later.

A distribution paid to a beneficiary other than the employee's surviving spouse is generally not an eligible rollover distribution. However, see Rollovers by nonspouse 

beneficiary next.

Rollovers by nonspouse beneficiary. If you are a designated beneficiary (other than a surviving spouse) of a 

deceased employee, you may be able to roll over tax free 

all or a portion of a distribution you receive from an eligible 

retirement plan of the employee. The distribution must be 

a direct trustee-to-trustee transfer to your traditional or 

30 Publication 575 (2023)
Roth IRA that was set up to receive the distribution. The 

transfer will be treated as an eligible rollover distribution 

and the receiving plan will be treated as an inherited IRA. 

For information on inherited IRAs, see What if You Inherit 

an IRA? in chapter 1 of Pub. 590-B.

How to report. Enter the total distribution (before income 

tax or other deductions were withheld) on Form 1040, 

1040-SR, or 1040-NR, line 5a. This amount should be 

shown in box 1 of Form 1099-R. From this amount, subtract any contributions (usually shown in box 5 of Form 

1099-R) that were taxable to you when made. From that 

result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Enter 

the remaining amount, even if zero, on Form 1040, 

1040-SR, or 1040-NR, line 5b. Also, enter “Rollover” next 

to the line.

Written explanation to recipients. The administrator of 

a qualified retirement plan must, within a reasonable period of time before making an eligible rollover distribution, 

provide you with a written explanation. It must tell you 

about all of the following.

• Your right to have the distribution paid tax free directly 

to another qualified retirement plan or to a traditional 

or Roth IRA.

• The requirement to withhold tax from the distribution if 

it isn't directly rolled over.

• The nontaxability of any part of the distribution that 

you roll over within 60 days after you receive the distribution.

• Other qualified retirement plan rules that apply, including those for lump-sum distributions, alternate payees, 

and cash or deferred arrangements.

• How the distribution rules of the plan to which you roll 

over the distribution may differ from the rules that apply to the plan making the distribution in their restrictions and tax consequences.

Reasonable period of time. The plan administrator 

must provide you with a written explanation no earlier than 

90 days and no later than 30 days before the distribution is 

made. However, you can choose to have a distribution 

made less than 30 days after the explanation is provided 

as long as the following two requirements are met.

• You must have the opportunity to consider whether or 

not you want to make a direct rollover for at least 30 

days after the explanation is provided.

• The information you receive must clearly state that you 

have the right to have 30 days to make a decision.

Contact the plan administrator if you have any questions 

regarding this information.

Designated Roth accounts. You can roll over an eligible 

rollover distribution from a designated Roth account into 

another designated Roth account or a Roth IRA. If you 

want to roll over the part of the distribution that isn't included in income, you must make a direct rollover of the entire distribution (see Direct rollover option, earlier) or you 

can roll over the entire amount (or any portion) to a Roth 

IRA. Also, if you are a plan participant in a 401(k), 403(b), 

or 457(b) plan, your plan may permit you to roll over 

amounts in those plans to a designated Roth account 

within the same plan (in-plan Roth rollover). The rollover of 

any untaxed amounts is included in income. See In-plan 

Roth rollovers, later.

A qualified distribution from a designated Roth account 

isn't includible in income. (A qualified distribution is defined earlier in the discussion of designated Roth accounts under Taxation of Periodic Payments).

If you roll over only part of an eligible rollover distribution that isn't a qualified distribution and not paid as a direct rollover contribution, the part rolled over is considered 

to be first from the income portion of the distribution.

Example. You receive an eligible rollover distribution 

that isn't a qualified distribution from your designated Roth 

account. The distribution consists of $11,000 (investment) 

and $3,000 (income earned). Within 60 days of receipt, 

you roll over $7,000 into a Roth IRA. The $7,000 consists 

of $3,000 of income and $4,000 of investment. Because 

you rolled over the part of the distribution that could be included in gross income (income earned), none of the distribution is included in gross income.

In-plan Roth rollovers. If you are a participant in a 

401(k), 403(b), or 457(b) plan, your plan may permit you 

to roll over any vested amounts from those plans to a designated Roth account within the same plan. The in-plan 

Roth rollover must be an eligible rollover distribution (defined earlier under Eligible rollover distribution). Any untaxed amounts included in the in-plan Roth rollover must 

be included in income in the year you receive the distribution.

You can make the in-plan Roth rollover by direct transfer of the amount from the non-Roth account to your designated Roth account within the same plan. The 20% 

mandatory withholding doesn't apply to in-plan Roth rollovers made by direct rollover. You can also effect the 

in-plan Roth rollover by receiving an eligible rollover distribution from your 401(k), 403(b), or 457(b) plan and within 

60 days depositing it into a designated Roth account in 

the same plan.

Your plan must provide a written explanation of the consequences of making an in-plan Roth rollover. In-plan 

Roth rollovers can't be undone. Unlike rollovers to Roth 

IRAs, you can't later recharacterize an in-plan Roth rollover.

If you received employer securities as a part of 

your in-plan Roth rollover distribution, the rollover 

is treated as a distribution for the purpose of NUA. 

See Distributions of employer securities, earlier.

Mandatory 20% withholding. A payor must normally 

withhold 20% when a rollover distribution is paid to you. 

However, some part of your distribution may not be subject to the mandatory 20% withholding. Otherwise nondistributable amounts aren't subject to the mandatory 20% 

withholding. An example of otherwise nondistributable 

TIP

Publication 575 (2023) 31
amounts is employer matching contributions in a 401(k) 

plan. See Payment-to-you option, earlier.

You can't roll over amounts from your traditional 

TSP to your Roth TSP. See Pub. 721 for more details.

How to report. Enter the total amount of the distribution before income tax or deductions were withheld on 

Form 1040, 1040-SR, or 1040-NR, line 5a. This amount 

should be shown in box 1 of Form 1099-R. From this 

amount, subtract any contributions (usually shown in 

box 5 of Form 1099-R) that were taxable to you when 

made. Enter the remaining amount, even if zero, on Form 

1040, 1040-SR, or 1040-NR, line 5b.

If you must include any amount in your gross income, you may have to increase your withholding 

or make estimated tax payments. See Pub. 505.

Rollovers to Roth IRAs. You can roll over distributions 

directly from a qualified retirement plan (other than a designated Roth account) to a Roth IRA. You must include in 

your gross income distributions from a qualified retirement 

plan (other than a designated Roth account) that you 

would have had to include in income if you hadn't rolled 

them over into a Roth IRA. You don't include in gross income any part of a distribution from a qualified retirement 

plan that is a return of contributions to the plan that were 

taxable to you when paid. In addition, the 10% tax on early 

distributions doesn't apply.

Any amount rolled over into a Roth IRA is subject to the 

same rules for converting a traditional IRA into a Roth IRA. 

For more information, see Converting From Any Traditional 

IRA Into a Roth IRA in chapter 1 of Pub. 590-A.

How to report. Enter the total amount of the distribution before income tax or deductions were withheld on 

Form 1040, 1040-SR, or 1040-NR, line 5a. This amount 

should be shown in box 1 of Form 1099-R. From this 

amount, subtract any contributions (usually shown in 

box 5 of Form 1099-R) that were taxable to you when 

made. Enter the remaining amount, even if zero, on Form 

1040, 1040-SR, or 1040-NR, line 5b.

If you must include any amount in your gross income, you may have to increase your withholding 

or make estimated tax payments. See Pub. 505.

Choosing the right option. Table 1 may help you decide 

which distribution option to choose. Carefully compare the 

effects of each option.

CAUTION

!

CAUTION

!

CAUTION

!

Table 1. Comparison of Payment to You 

Versus Direct Rollover

Affected item

Result of a payment to 

you

Result of a direct 

rollover

Withholding The payer must withhold 

20% of the taxable part. There is no withholding.

Additional tax

If you are under age 

591/2, a 10% additional 

tax may apply to the 

taxable part (including 

an amount equal to the 

tax withheld) that isn't 

rolled over. 

There is no 10% 

additional tax. See Tax 

on Early Distributions.

When to report

as income

Any taxable part 

(including the taxable 

part of any amount 

withheld) not rolled over 

is income to you in the 

year paid.

Any taxable part isn't 

income to you until later 

distributed to you from 

the new plan or IRA. 

However, see Rollovers 

to Roth IRAs for an 

exception.

Qualified settlement income. If you are a qualified taxpayer and you received qualified settlement income in 

connection with the Exxon Valdez litigation, you can contribute all or part of it to an eligible retirement plan. This includes a qualified retirement plan. The amount contributed 

can’t exceed $100,000 (reduced by the amount of qualified settlement income contributed to an eligible retirement plan in prior tax years) or the amount of qualified settlement income received during the tax year. Contributions 

for the year can be made until the due date for filing your 

tax return, not including extensions.

Qualified settlement income that you contribute to a 

qualified retirement plan will be treated as having been rolled over in a direct trustee-to-trustee transfer within 60 

days of the distribution. The amount contributed isn’t included in your taxable income and it isn’t considered to be 

investment in the contract.

You are a qualified taxpayer if you are:

• A plaintiff in the civil action In re Exxon Valdez, No. 

89-095-CV (HRH) (Consolidated) (D. Alaska), or

• The beneficiary of the estate of a plaintiff who acquired the right to receive qualified settlement income 

from that plaintiff and who is the spouse or immediate 

relative of that plaintiff.

Qualified settlement income is any interest or punitive 

damage awards which are:

• Otherwise includible in income, and

• Received in connection with the Exxon Valdez civil action described (whether pre- or post-judgment and 

whether related to a settlement or a judgment).

Qualified settlement income can be received as periodic 

payments or as a lump sum. See Pub. 525 for information 

on how to report Exxon Valdez settlement income.

32 Publication 575 (2023)
Special rule for Roth IRAs and designated Roth accounts. Qualified settlement income that is contributed to 

a Roth IRA or a designated Roth account will be:

• Included in your taxable income for the year the qualified settlement income was received, and

• Treated as part of your cost basis (investment in the 

contract) that isn’t taxable when distributed.

Special Additional Taxes

To discourage the use of pension funds for purposes other 

than normal retirement, the law imposes additional taxes 

on early distributions of those funds and on failures to 

withdraw the funds timely. Ordinarily, you won't be subject 

to these taxes if you roll over all early distributions you receive, as explained earlier, and begin drawing out the 

funds at a normal retirement age in prorated amounts over 

your life expectancy. These special additional taxes are 

the taxes on:

• Early distributions, and

• Excess accumulation (not receiving minimum distributions).

These taxes are discussed in the following sections.

If you must pay either of these taxes, report them on 

Form 5329. However, you don't have to file Form 5329 if 

you owe only the tax on early distributions and your Form 

1099-R correctly shows code “1” in box 7. Instead, enter 

10% of the taxable part of the distribution on Schedule 2 

(Form 1040), line 8. Also check the box on line 8 to indicate that you don't have to file Form 5329.

Even if you don't owe any of these taxes, you may have 

to complete Form 5329 and attach it to your Form 1040, 

1040-SR, or 1040-NR. This applies if you meet an exception to the tax on early distributions but box 7 of your Form 

1099-R doesn't indicate an exception.

Tax on Early Distributions

Most distributions (both periodic and nonperiodic) from 

qualified retirement plans and nonqualified annuity contracts made to you before you reach age 591/2 are subject 

to an additional tax of 10%. This tax applies to the part of 

the distribution that you must include in gross income. It 

doesn't apply to any part of a distribution that is tax free, 

such as amounts that represent a return of your cost or 

that were rolled over to another retirement plan. It also 

doesn’t apply to corrective distributions of excess deferrals, excess contributions, or excess aggregate contributions (discussed earlier under Taxation of Nonperiodic 

Payments).

For this purpose, a qualified retirement plan is:

• A qualified employee plan (including a qualified cash 

or deferred arrangement (CODA) under Internal Revenue Code section 401(k)),

• A qualified employee annuity plan,

• A tax-sheltered annuity plan (403(b) plan), or

• An eligible state or local governmental section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a 

direct transfer or rollover from one of the other plans 

listed here or an IRA).

5% rate on certain early distributions from deferred 

annuity contracts. If an early withdrawal from a deferred 

annuity is otherwise subject to the 10% additional tax, a 

5% rate may apply instead. A 5% rate applies to distributions under a written election providing a specific schedule for the distribution of your interest in the contract if, as 

of March 1, 1986, you had begun receiving payments under the election. On line 4 of Form 5329, multiply the line 3 

amount by 5% instead of 10%. Attach an explanation to 

your return.

Distributions from designated Roth accounts allocable to in-plan Roth rollovers within the 5-year period. 

If, within the 5-year period starting with the first day of your 

tax year in which you rolled over an amount from your 

401(k), 403(b), or 457(b) plan to a designated Roth account, you take a distribution from the designated Roth account, you may have to pay the additional 10% tax on 

early distributions. You must generally pay the 10% additional tax on any amount attributable to the part of the 

in-plan Roth rollover that you had to include in income (recapture amount). A separate 5-year period applies to each 

in-plan Roth rollover. See Figuring your recapture amount, 

later, to determine the recapture amount, if any.

The 5-year period used for determining whether the 

10% early distribution tax applies to a distribution allocable to an in-plan Roth rollover is separately determined for 

each in-plan Roth rollover, and isn't necessarily the same 

as the 5-year period used for determining whether a distribution is a qualified distribution.

Figuring your recapture amount. For any early distribution in 2023 from your designated Roth account that 

is allocable to an in-plan Roth rollover, you allocate the 

amount from box 10 of your 2023 Form 1099-R to the 

amounts, if any, you have rolled over into that designated 

Roth account.

If you haven’t taken a distribution from your designated 

Roth account before 2023, then allocate the amount in 

box 10 of your 2023 Form 1099-R to the amounts you reported on the lines listed in the Recapture Allocation Chart 

(filling in the Taxable column first, and then the Nontaxable 

column for each year) until you have covered the entire 

amount in box 10.

If you have taken a distribution from your designated 

Roth account prior to 2023, then allocate the amount in 

box 10 of your 2023 Form 1099-R to the amounts you reported on the lines listed in the Recapture Allocation Chart 

(filling in the Taxable column first, and then the Nontaxable 

column for each year). However, don't start at the beginning; instead, begin with the first line that hasn’t been 

used fully for a previous distribution.

Your recapture amount is the sum of the amounts you 

allocated for 2011 through 2023 under the Taxable column 

Publication 575 (2023) 33
in the Recapture Allocation Chart. You will also include 

this amount on Form 5329, line 1.

Example. You had an in-plan Roth rollover in 2023 of 

$50,000. This is your first in-plan Roth rollover. Your 2023 

Form 1040 or 1040-SR includes $30,000 on line 5b, the 

taxable portion of the in-plan Roth rollover, and $50,000 

on line 5a, the in-plan Roth rollover including $20,000 of 

basis.

In December 2023, at age 57, you took a distribution of 

$35,000 from your designated Roth account. The 2023 

Form 1099-R shows the distribution of $35,000 reported in 

box 1, the taxable portion of the distribution of $3,500 reported in box 2a, and the amount of $31,500 allocable to 

the in-plan Roth rollover reported in box 10. Because you 

had no in-plan Roth rollovers in prior years, you would allocate the $31,500 reported in box 10 of Form 1099-R as 

shown in the Example Recapture Allocation Chart.

The recapture amount, the amount subject to tax on 

early distributions allocable to the in-plan Roth rollover, is 

$30,000 ($31,500 − $1,500). Your amount subject to tax 

on early distributions reported on Form 5329, line 1, for 

this distribution is $33,500 ($30,000 allocable to Form 

1040 or 1040-SR, line 5b; and $3,500 from box 2a of Form 

1099-R).

Exceptions to tax. Certain early distributions are excepted from the early distribution tax. If the payer knows that 

an exception applies to your early distribution, distribution 

code “2,” “3,” or “4” should be shown in box 7 of your Form 

1099-R and you don't have to report the distribution on 

Form 5329. If an exception applies but distribution code 

“1” (early distribution, no known exception) is shown in 

box 7, you must file Form 5329. Enter the taxable amount 

of the distribution shown in box 2a of your Form 1099-R on 

line 1 of Form 5329. On line 2, enter the amount that can 

be excluded and the exception number shown in the Form 

5329 instructions.

If distribution code “1” is incorrectly shown on your 

Form 1099-R for a distribution received when you 

were age 591/2 or older, include that distribution 

on Form 5329. Enter exception number “12” on line 2.

General exceptions. The tax doesn’t apply to distributions that are:

• Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or 

life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a 

qualified retirement plan, the payments must begin after separation from service) (see Substantially equal 

periodic payments, later);

• Made because you are totally and permanently disabled (see Note, later);

• Made to you because you have received a certification 

that you are terminally ill; or

• Made on or after the death of the plan participant or 

contract holder.

Disabled. You are considered disabled if you can furnish 

proof that you can't do any substantial gainful activity because of your physical or mental condition. A physician 

must determine that your condition can be expected to result in death or be of a long, continued, or indefinite duration.

Distributions to terminally ill individuals. You may be 

able to take a distribution from a qualified retirement plan 

before reaching age 591/2 and not have to pay the 10% 

additional tax on early distributions if you receive the distribution on or after the date you have received a certification by a physician that you are terminally ill.

Terminally ill individual. You are considered terminally 

ill if you are certified by a physician as having an illness or 

TIP

Example Recapture Allocation Chart Keep for Your Records

Tax Year Taxable Nontaxable (Basis)

2010 Form 8606, line 23 ........ Form 8606, line 22 ...........

2011 Form 1040, line 16b;* Form 

1040A, line 12b;* or Form 

1040NR, line 17b* .........

Form 1040, line 16a**; Form 

1040A, line 12a**; or Form 

1040NR, line 17a** ...........

2012 Form 1040, line 16b;* Form 

1040A, line 12b;* or Form 

1040NR, line 17b* .........

Form 1040, line 16a;** Form 

1040A, line 12a;** or Form 

1040NR, line 17a** ...........

2022 Form 1040, 1040-SR, or 

1040-NR, line 5b* .........

Form 1040, 1040-SR, or 

1040-NR, line 5a** ...........

2023 Form 1040, 1040-SR, or 

1040-NR, line 5b* ......... $30,000

Form 1040, 1040-SR, or 

1040-NR, line 5a** ........... $1,500

Total ..................... $30,000 Total ........................ $1,500

Note. The sum of the totals for each column should equal the amount reported in box 10 of your 2023 Form 1099-R.

* Only include those amounts attributable to an in-plan Roth rollover.

** Only include any contributions (usually box 5 of Form 1099-R) that were taxable to you when made and attributable to an in-plan 

Roth rollover.

34 Publication 575 (2023)
physical condition which can reasonably be expected to 

result in death in 84 months or less after the date of the 

certification.

Certification of terminal illness. A certification of terminal illness must include the following:

• A statement that the individual’s illness or physical 

condition can be reasonably expected to result in 

death in 84 months or less after the date of certification.

• A narrative description of the evidence that was used 

to support the statement of illness or physical condition.

• It must include the name and contact information of 

the physician making the statement.

• The statement must include the date the physician examined the individual or reviewed the evidence provided by the individual, and the date that the physician 

signed the certification.

• The statement must include the signature of the physician making the statement, and an attestation from the 

physician that, by signing the form, the physician confirms that the physician composed the narrative description based on the physician’s examination of the 

individual or the physician’s review of the evidence 

provided by the individual.

However, it is not sufficient evidence for an employee 

who is a physician to certify the physician’s own terminal 

illness.

Amount may be repaid. You may repay an amount 

you received because you are certified terminally ill by 

making one or more contributions to the plan as long as 

the total of those contributions doesn’t exceed the amount 

distributed to you as a terminally ill individual.

Additional exceptions for qualified retirement 

plans. The 10% additional tax doesn’t apply to distributions that are:

• From a qualified retirement plan (other than an IRA) 

after your separation from service in or after the year 

you reached age 55 (the earlier of age 50 or 25 years 

of service under the plan for qualified public safety 

employees) (see Separation from service, later);

• From a qualified retirement plan (other than IRA) after 

your separation from service in or after the year you 

reached the earlier of age 50 or 25 years of service 

under the plan, if you are a private sector firefighter.

• From a qualified retirement plan (other than an IRA) to 

an alternate payee under a QDRO;

• From a qualified retirement plan to the extent you have 

deductible medical expenses that exceed 7.5% of 

your adjusted gross income, whether or not you itemize your deductions for the year;

• From an employer plan under a written election that 

provides a specific schedule for distribution of your entire interest if, as of March 1, 1986, you had separated 

from service and had begun receiving payments under the election;

• From an employee stock ownership plan for dividends 

on employer securities held by the plan;

• From a qualified retirement plan due to an IRS levy of 

the plan;

• From elective deferral accounts under 401(k) or 

403(b) plans, or similar arrangements, that are qualified reservist distributions;

• Phased retirement annuity payments made to federal 

employees (see Pub. 721 for more information on the 

phased retirement program); or

• From a qualified retirement plan (other than an IRA) 

for a qualified birth or adoption (for more information, 

see Qualified birth or adoption distributions, later).

Separation from service. In order to meet the requirements for the first two exceptions in the list above, 

you must have separated from service in or after the year 

in which you reach age 55 (or the earlier of age 50 or with 

25 years of service under the plan, whichever is earlier, for 

qualified public safety employees and private sector firefighters).

You can’t separate from service before that year. Wait 

until you reach the applicable age, described above, and 

take a distribution.

Example. George separated from service from his employer at age 49. In the year he reached age 55, he took a 

distribution from his retirement plan. Because he separated from service before he reached age 55, he didn’t meet 

the requirements for the exception for a distribution made 

from a qualified retirement plan (other than an IRA) after 

separating from service in or after reaching age 55.

Qualified public safety employees. If you are a 

qualified public safety employee, distributions that are 

made from a governmental retirement plan may not be 

subject to the 10% additional tax on early distributions. 

See Certain distributions to qualified public safety employees, later.

You are a qualified public safety employee if you provided police protection, firefighting services, or emergency 

medical services for a state or municipality.

For tax years beginning after 2015, the definition of 

qualified public safety employees is expanded to include:

• Federal law enforcement officers,

• Federal customs and border protection officers,

• Federal firefighters,

• Air traffic controllers,

• Nuclear materials couriers,

• Members of the United States Capitol Police,

• Members of the Supreme Court Police, and

• Diplomatic security special agents of the United 

States Department of State.

Publication 575 (2023) 35
Certain distributions to qualified public safety employees. The exception to the 10% additional tax for 

early distributions applies to distributions made to qualified public safety employees and firefighters covered by 

private sector retirement plans after separation from service on or after they reach age 50 or with 25 years of service under the plan, whichever is earlier. The exception 

also includes distributions to those employees who meet 

the age or years of service requirement, as described earlier, who provide services as a corrections officer or as a 

forensic security employee providing for the care, custody, 

and control of forensic patients.

Qualified reservist distributions. A qualified reservist distribution isn’t subject to the additional tax on early 

distributions. A qualified reservist distribution is a distribution (a) from elective deferrals under a section 401(k) or 

403(b) plan, or a similar arrangement; (b) to an individual 

ordered or called to active duty (because they are a member of a reserve component) for a period of more than 179 

days or for an indefinite period; and (c) made during the 

period beginning on the date of the order or call and ending at the close of the active duty period. You must be ordered or called to active duty after September 11, 2001.

You can choose to recontribute part or all of the 

distributions to an IRA. These additional contributions must be made within 2 years after your active-duty period ends. Any amount recontributed must be 

reported on Form 8606 as a nondeductible contribution. 

You can’t take a deduction for these contributions. However, the normal dollar limitations for contributions to IRAs 

don't apply to these special contributions, and you can 

make regular contributions to your IRA, up to the amount 

otherwise allowable.

Qualified birth or adoption distributions. A qualified 

birth or adoption distribution isn't subject to the additional 

tax on early distributions. An individual can receive up to 

$5,000 from an applicable eligible retirement plan for a 

distribution made during the 1-year period beginning on 

the date on which a child of the individual is born or the 

date on which the legal adoption by the individual of an eligible adoptee is finalized. For more information on qualified birth or adoption distributions, see Notice 2020-68, 

which is on page 567 of Internal Revenue Bulletin 2020-38 

at IRS.gov/pub/irs-irb20-38.pdf.

Repayment of qualified birth or adoption distributions limited to 3 years. If you received a qualified birth 

or adoption distribution after December 29, 2022, you may 

repay the distribution by making one or more contributions 

to a qualified plan during the 3-year period beginning on 

the day after the date on which the distribution was received. For distributions received on or before December 

29, 2022, you may repay the distribution during the period 

that begins after the distribution was received and ending 

on the date before January 1, 2026.

TIP

Additional exceptions for nonqualified annuity contracts. The tax doesn’t apply to distributions that are:

• From a deferred annuity contract to the extent allocable to investment in the contract before August 14, 

1982;

• From a deferred annuity contract under a qualified 

personal injury settlement;

• From a deferred annuity contract purchased by your 

employer upon termination of a qualified employee 

plan or qualified employee annuity plan and held by 

your employer until your separation from service; or

• From an immediate annuity contract (a single premium 

contract providing substantially equal annuity payments that start within 1 year from the date of purchase and are paid at least annually).

Substantially equal periodic payments. Payments 

are substantially equal periodic payments if they are made 

in accordance with one of the following methods.

1. Required minimum distribution method. Under 

this method, the resulting annual payment is redetermined for each year.

2. Fixed amortization method. Under this method, the 

resulting annual payment is determined once for the 

first distribution year and remains the same amount 

for each succeeding year.

3. Fixed annuitization method. Under this method, the 

resulting annual payment is determined once for the 

first distribution year and remains the same amount 

for each succeeding year.

For information on these methods, see Notice 2022-6 at 

IRS.gov/irb/2022-05_IRB#NOT-2022-06.

A change from method (2) or (3) to method (1) 

isn’t treated as a modification to which the recapture tax (discussed next) applies.

Note. For a series of substantially equal periodic payments starting in 2022, you may apply the guidance either 

in Notice 2022-6, or in Revenue Ruling 2002-62 which is 

on page 710 of Internal Revenue Bulletin 2002-42 at 

IRS.gov/pub/irs-irbs/irb02-42.pdf.

Distributions received as periodic payments on or 

after December 29, 2022, will not fail to be treated 

as substantially equal merely because they are received as an annuity.

Recapture tax for changes in distribution method 

under equal payment exception. An early distribution 

recapture tax may apply if, before you reach age 591/2, the 

distribution method under the equal periodic payment exception changes (for reasons other than your death or disability). The tax applies if the method changes from the 

method requiring equal payments to a method that 

wouldn’t have qualified for the exception to the tax. The recapture tax applies to the first tax year to which the 

change applies. The amount of tax is the amount that 

TIP TIP

36 Publication 575 (2023)
would have been imposed had the exception not applied, 

plus interest for the deferral period.

The recapture tax also applies after you reach age 

591/2 if your payments under a distribution method that 

qualifies for the exception are modified within 5 years of 

the date of the first payment. In that case, the tax applies 

only to payments distributed before you reach age 591/2.

Report the recapture tax and interest on line 4 of Form 

5329. Attach an explanation to the form. Don’t enter the 

explanation next to the line or enter any amount for the recapture on line 1 or 3 of the form. 

Tax on Excess Accumulation

To make sure that most of your retirement benefits are 

paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive 

from qualified retirement plans must begin no later than 

your required beginning date (defined later). The payments each year can’t be less than the RMD.

If the actual distributions to you in any year are less 

than the RMD for that year, you are subject to an additional tax. The tax equals 50% of the part of the RMD that 

wasn’t distributed.

For this purpose, a qualified retirement plan includes:

• A qualified employee plan,

• A qualified employee annuity plan,

• An eligible section 457 deferred compensation plan, 

or

• A tax-sheltered annuity plan (403(b) plan) (for benefits 

accruing after 1986).

Reduced tax rate for excess accumulations. The additional tax rate for distributions that are less than the 

RMD amount (excess accumulations) is reduced to 25% 

for tax years beginning in 2023 and after.

You may be subject to a reduced additional tax rate of 

10% of the amount not distributed if, during the correction 

window, you take a distribution of the amount on which the 

tax is due and submit a tax return reflecting this additional 

tax.

The “correction window” is the period of time beginning 

on the date on which the additional tax is imposed on the 

distribution shortfall and ends on the earliest of:

• The date of mailing the deficiency notice with respect 

to the imposition of this tax;

• The date the tax is assessed; or

• The last day of the second tax year that begins after 

the date of the tax year in which the additional tax is 

imposed.

Waiver. The tax may be waived if you establish that the 

shortfall in distributions was due to reasonable error and 

that reasonable steps are being taken to remedy the 

shortfall. If you believe you qualify for this relief, you must 

file Form 5329. Enter “RC” and the amount you want 

waived in parentheses on the dotted line next to line 54, 

and attach a letter of explanation. Subtract this amount 

from the total shortfall you figured without regard to the 

waiver and enter the result on line 54.

State insurer delinquency proceedings. You might 

not receive the minimum distribution because assets are 

invested in a contract issued by an insurance company in 

state insurer delinquency proceedings. If your payments 

are reduced below the minimum because of these proceedings, you should contact your plan administrator. Under certain conditions, you won’t have to pay the 50% tax.

Required beginning date. Unless the rule for 5% owners applies, you must generally begin to receive distributions from your qualified retirement plan by April 1 of the 

year that follows the later of:

• The calendar year in which you reach age 73, or

• The calendar year in which you retire from employment with the employer maintaining the plan.

However, your plan may require you to begin to receive 

distributions by April 1 of the year that follows the year in 

which you reach age 73 even if you haven’t retired.

5% owners. If you are a 5% owner, you must begin to 

receive distributions from the plan by April 1 of the year 

that follows the calendar year in which you reach age 73. 

This rule doesn’t apply if your retirement plan is a governmental or church plan.

You are a 5% owner if, for the plan year ending in the 

calendar year in which you reach age 73, you own (or are 

considered to own under section 318 of the Internal Revenue Code) more than 5% of the outstanding stock (or 

more than 5% of the total voting power of all stock) of the 

employer, or more than 5% of the capital or profits interest 

in the employer.

Required distributions. By the required beginning date, 

you must either:

• Receive your entire interest in the plan (for a tax-sheltered annuity, your entire benefit accruing after 1986), 

or

• Begin receiving periodic distributions in annual 

amounts calculated to distribute your entire interest 

(for a tax-sheltered annuity, your entire benefit accruing after 1986) over your life or life expectancy or over 

the joint lives or joint life expectancies of you and a 

designated beneficiary (or over a shorter period).

After the starting year for periodic distributions, you 

must receive at least the RMD for each year by December 

31 of that year. (The starting year is the year in which you 

reach age 73 or retire, whichever applies in determining 

your required beginning date.) If no distribution is made in 

your starting year, the RMDs for 2 years must be made the 

following year (one by April 1 and one by December 31).

Distributions after the employee's death. If the employee was receiving periodic distributions before their 

death and the employee dies after the required beginning 

date, any payments not made as of the time of death must 

generally be distributed at least as rapidly as under the 

distribution method being used at the date of death.

Publication 575 (2023) 37
In addition, if distributions are being made from a defined contribution plan and the employee's beneficiary is 

not an eligible designated beneficiary, any payments not 

made as of the time of death must be distributed within 10 

years after the death of the employee. An eligible designated beneficiary is the employee's spouse, the employee's 

child who has not reached majority, a disabled individual, 

a chronically ill individual, or an individual not more than 

10 years younger than the employee.

If the employee dies before the required beginning 

date, the entire account must be distributed under one of 

the following rules.

• Rule 1. The distribution must be completed by December 31 of the 5th year following the year of the employee's death if the employee was a participant in a 

defined benefit plan or if there's no designated beneficiary.

• Rule 2. The distribution must be completed by December 31 of the 10th year following the year of the 

employee's death if the employee was a participant in 

a defined contribution plan and designated an individual as the beneficiary under the plan.

• Rule 3. The distribution must be made in annual 

amounts over the life of an individual designated as a 

beneficiary under a defined benefit plan or life expectancy of an eligible designated beneficiary under a defined contribution plan.

The terms of the plan may determine which of these 

three rules applies. If the plan permits the employee or the 

eligible designated beneficiary to choose the rule that applies, this choice must be made by the earliest date a distribution would be required under either of the rules. Generally, this date is December 31 of the year following the 

year of the employee's death.

If the employee or the eligible designated beneficiary 

didn’t choose a rule and the plan doesn’t specify the rule 

that applies, distribution must be made under Rule 3 if the 

employee has an eligible designated beneficiary (or in the 

case of a defined benefit plan, an individual was designated as the beneficiary under the plan) or under Rule 2 if 

the employee was a participant in a defined contribution 

plan, and has designated an individual as the beneficiary 

under the plan, but that individual isn't an eligible designated beneficiary. If an employee doesn't have a designated 

beneficiary, distribution must be made under Rule 1.

Distributions under Rule 3 must generally begin by December 31 of the year following the year of the employee's 

death. However, if the surviving spouse is the beneficiary, 

distributions need not begin until December 31 of the year 

the employee would have reached age 73, if later.

If the surviving spouse is the designated beneficiary 

and distributions are to be made under Rule 3, a special 

rule applies if the spouse dies after the employee but before distributions are required to begin. In this case, distributions may be made to the spouse's beneficiary under 

either Rule 1, Rule 2, or Rule 3 as though the beneficiary 

were the employee's beneficiary and the employee died 

on the spouse's date of death. However, if the surviving 

spouse remarries after the employee's death and the new 

spouse is designated as the spouse's beneficiary, this 

special rule applicable to surviving spouses doesn’t apply 

to the new spouse.

If distributions from a defined contribution plan began 

under Rule 3 and the eligible designated beneficiary dies 

or a beneficiary who is a minor child reaches majority, distributions must be completed by December 31 of the 10th 

year following the year of the beneficiary's death or the 

child reaching majority.

Minimum distributions from an annuity plan. Special 

rules may apply if you receive distributions from your retirement plan in the form of an annuity. Your plan administrator should be able to give you information about these 

rules.

Minimum distributions from an individual account 

plan. Your plan administrator should be able to give you 

information about how the amount of your RMD was figured.

If there is an account balance to be distributed from 

your plan (not as an annuity), your plan administrator must 

figure the minimum amount that must be distributed from 

the plan each year.

What types of installments are allowed? The minimum amount that must be distributed for any year may be 

made in a series of installments (for example, monthly or 

quarterly) as long as the total payments for the year made 

by the date required aren’t less than the minimum amount 

required for the year.

More than minimum. Your plan can distribute more in 

any year than the minimum amount required for that year; 

but if it does, you won’t receive credit for the additional 

amount in determining the minimum amount required for 

future years. However, any amount distributed in your 

starting year will be credited toward the amount required 

to be distributed by April 1 of the following year.

Combining multiple accounts to satisfy the minimum 

distribution requirements. Generally, the RMD must be 

figured separately for each account. Each qualified employee retirement plan and qualified annuity plan must be 

considered individually in satisfying its distribution requirements. However, if you have more than one tax-sheltered 

annuity account, you can total the RMDs and then satisfy 

the requirement by taking distributions from any one (or 

more) of the tax-sheltered annuities.

Survivors and Beneficiaries

Generally, a survivor or beneficiary reports pension or annuity income in the same way the plan participant would 

have reported it. However, some special rules apply, and 

they are covered elsewhere in this publication as well as in 

this section.

Estate tax deduction. You may be entitled to a deduction for estate tax if you receive amounts included in your 

income as income in respect of a decedent under a joint 

and survivor annuity that was included in the decedent's 

estate. You can deduct the part of the total estate tax that 

38 Publication 575 (2023)
was based on the annuity, provided that the decedent died 

after their annuity starting date. (For details, see Regulations section 1.691(d)-1.) Deduct it in equal amounts over 

your remaining life expectancy.

If the decedent died before the annuity starting date of 

a deferred annuity contract and you receive a death benefit under that contract, the amount you receive (either in a 

lump sum or as periodic payments) in excess of the decedent's cost is included in your gross income as income in 

respect of a decedent for which you may be able to claim 

an estate tax deduction.

You can take the estate tax deduction as an itemized 

deduction on Schedule A (Form 1040). This deduction 

isn’t subject to the 2%-of-adjusted-gross-income limit on 

miscellaneous deductions. See Pub. 559, Survivors, Executors, and Administrators, for more information on the 

estate tax deduction.

Survivors of employees. Distributions the beneficiary of 

a deceased employee gets may be accrued salary payments; distributions from employee profit-sharing, pension, annuity, or stock bonus plans; or other items. Some 

of these should be treated separately for tax purposes. 

The treatment of these distributions depends on what they 

represent.

Salary or wages paid after the death of the employee 

are usually the beneficiary's ordinary income. If you are a 

beneficiary of an employee who was covered by any of the 

retirement plans mentioned, you can exclude from income 

nonperiodic distributions received that totally relieve the 

payer from the obligation to pay an annuity. The amount 

that you can exclude is equal to the deceased employee's 

investment in the contract (cost).

If you are entitled to receive a survivor annuity on the 

death of an employee, you can exclude part of each annuity payment as a tax-free recovery of the employee's investment in the contract. You must figure the taxable and 

tax-free parts of each payment using the method that applies as if you were the employee. For more information, 

see Taxation of Periodic Payments, earlier.

Survivors of retirees. Benefits paid to you as a survivor 

under a joint and survivor annuity must be included in your 

gross income. Include them in income in the same way the 

retiree would have included them in gross income. See 

Partly Taxable Payments under Taxation of Periodic Payments, earlier.

If the retiree reported the annuity under the 3-year Rule 

and recovered all of the cost tax free, your survivor payments are fully taxable.

If the retiree was reporting the annuity under the General Rule, you must apply the same exclusion percentage 

to your initial survivor annuity payment called for in the 

contract. The resulting tax-free amount will then remain 

fixed for the initial and future payments. Increases in the 

survivor annuity are fully taxable. See Pub. 939 for more 

information on the General Rule.

If the retiree was reporting the annuity under the Simplified Method, the part of each payment that is tax free is 

the same as the tax-free amount figured by the retiree at 

the annuity starting date. This amount remains fixed even 

if the annuity payments are increased or decreased. See 

Simplified Method under Taxation of Periodic Payments, 

earlier.

Guaranteed payments. If you receive guaranteed 

payments as the decedent's beneficiary under a life annuity contract, don’t include any amount in your gross income until your distributions plus the tax-free distributions 

received by the life annuitant equal the cost of the contract. All later distributions are fully taxable. This rule 

doesn’t apply if it is possible for you to collect more than 

the guaranteed amount. For example, it doesn’t apply to 

payments under a joint and survivor annuity.

Disaster-Related Relief

Introduction

The special rules that provide for tax-favored withdrawals 

and repayments from certain qualified plans for taxpayers 

who suffered an economic loss as a result of a qualified 

disaster were made permanent by the SECURE 2.0 Act of 

2022. See Qualified disaster recovery distributions and 

Qualified Disaster Distributions, later, for more information.

The principles set forth in Notice 2005-92, 2005-51 

I.R.B. 1165, available at IRS.gov/irb/2005-51_IRB (which 

provides guidance on the tax-favored treatment of distributions for victims of Hurricane Katrina), and Notice 

2020-50, 2020-28 I.R.B. 35, available at IRS.gov/IRB/

2020-28_IRB (which provides guidance on the tax-favored 

treatment of distributions for individuals impacted by the 

coronavirus pandemic), generally also apply to these 

rules.

If you received a qualified disaster recovery distribution 

or a qualified disaster distribution (both defined later), it is 

taxable but isn’t subject to the 10% additional tax on early 

distributions. (Use Form 8915-F to figure the taxable portion of the distribution.) However, the distribution is included in income ratably over 3 years unless you elect to report the entire amount in the year of distribution. For 

example, if you received a $60,000 qualified disaster distribution in 2020, you can include $20,000 in your income 

in 2020, 2021, and 2022. However, you can elect to include the entire distribution in your income in the year it 

was received. Also, you can repay the distribution and not 

be taxed on the distribution. See Repayment of Qualified 

Disaster Distributions, later.

The distribution limit for qualified disaster recovery distributions is not the same as the limit for 

qualified disaster distributions. See Distribution 

limit for qualified disaster recovery distributions and Distribution limit for qualified disaster distributions, later, for 

more information.

If you received a distribution from an eligible retirement 

plan to purchase or construct a main home but didn’t purchase or construct a main home because of a major disaster, you may be able to repay the distribution and not 

CAUTION

!

Publication 575 (2023) 39
pay income tax or the 10% additional tax on early distributions. See Recontribution of Qualified Distributions for the 

Purchase or Construction of a Main Home, later.

Use Forms 8915-C, 8915-D, and 8915-F to report qualified disaster distributions and repayments. Also report recontributions of qualified distributions for home purchases 

and construction that were canceled because of qualified 

2018, 2019, 2020, or later disasters on Form 8915-C, 

8915-D, or 8915-F, as applicable.

Qualified Disaster Recovery 

Distributions

A qualified disaster recovery distribution is a qualified disaster distribution that meets certain criteria as described 

in the SECURE 2.0 Act of 2022. It is a distribution made 

from an eligible retirement plan to an individual whose 

main home was in a qualified disaster area during the period described under Qualified disaster recovery distribution, later. This individual must have sustained an economic loss because of the disaster.

Main home (principal place of abode). Generally, your 

main home is the home where you live most of the time. A 

temporary absence due to special circumstances, such as 

illness, education, business, military service, evacuation, 

or vacation, won’t change your main home.

Qualified disaster. A qualified disaster means any major 

disaster declared by the President under section 401 of 

the Robert T. Stafford Disaster Relief and Emergency Assistance Act after December 27, 2020.

Qualified disaster area. A qualified disaster area 

means any area with respect to which the major disaster 

was declared under the Robert T. Stafford Disaster Relief 

and Emergency Assistance Act. This term does not include any area which is a qualified disaster area solely by 

reason of section 301 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

A qualified disaster area under section 301 of the 

Taxpayer Certainty and Disaster Tax Relief Act of 

2020 would be a major disaster that was declared 

by the President during the period between January 1, 

2020, and February 25, 2021. Also, this disaster must 

have an incident period that began on or after December 

28, 2019, and on or before December 27, 2020, and must 

have ended no later than January 26, 2021. The definition 

of a qualified disaster loss does not extend to any major 

disaster which has been declared only by reason of 

COVID-19.

Incident period. The incident period for any qualified 

disaster is the period specified by the Federal Emergency 

Management Agency (FEMA) as the period during which 

the disaster occurred.

Qualified disaster recovery distribution. A qualified 

disaster recovery distribution is any distribution:

• Made on or after the first day of the incident period of 

a qualified disaster and before the date that is 180 

CAUTION

!

days after the applicable date with respect to such disaster, and

• Made to an individual whose principal place of abode 

at any time during such qualified disaster is located in 

the qualified disaster area, and

• That individual has sustained an economic loss by 

reason of such qualified disaster.

Economic loss. Qualified disaster distributions are permitted without regard to your need or the actual amount of 

your economic loss. Examples of an economic loss include, but aren’t limited to:

1. Loss, damage to, or destruction of real or personal 

property from fire, flooding, looting, vandalism, theft, 

wind, or other cause;

2. Loss related to displacement from your home; or

3. Loss of livelihood due to temporary or permanent layoffs.

Eligible retirement plan. An eligible retirement plan can 

be any of the following.

• A qualified pension, profit-sharing, or stock bonus 

plan (including a 401(k) plan).

• The federal Thrift Savings Plan.

• A qualified annuity plan.

• A tax-sheltered annuity contract.

• A governmental section 457 deferred compensation 

plan.

• A traditional, SEP, SIMPLE, or Roth IRA (including 

Roth SEP and SIMPLE IRAs).

Applicable date. The term “applicable date” means 

the latest of:

• December 29, 2022;

• The first date of the incident period for the qualified 

disaster; or

• The declaration date of the qualified disaster.

Distribution limit for qualified disaster recovery distributions. The total of your qualified disaster recovery 

distributions from all plans is limited to $22,000 per disaster. If you take distributions from more than one type of 

plan, such as a 401(k) plan and an IRA, and the total 

amount of your distribution exceeds $22,000, you may allocate the $22,000 limit among the plans by any reasonable method you choose.

Qualified Disaster Distributions

The definition of a qualified disaster distribution is a distribution made from an eligible retirement plan to an individual whose main home was in a qualified disaster area (described next) at any time during that disaster’s incident 

period and who sustained an economic loss because of 

the disaster.

40 Publication 575 (2023)
Qualified disaster area for qualified disaster distributions. A qualified disaster area is any area with respect to which a major disaster was declared after 2017 

and before February 26, 2021, by the President under 

section 401 of the Robert T. Stafford Disaster Relief and 

Emergency Assistance Act, except the California wildfire 

disaster area defined in the Bipartisan Budget Act of 

2018, or any area with respect to which a major disaster 

has been declared solely due to COVID-19.

Incident period for qualified distributions. The incident period for any qualified disaster is the period specified by the Federal Emergency Management Agency 

(FEMA) as the period during which the disaster occurred, 

but not including any dates before 2018. This includes 

those disasters that occurred on or after December 28, 

2020, and continued no later than January 26, 2021.

Qualified disaster distribution. A qualified disaster distribution for 2018, 2019, and 2020 disasters are those distributions from an eligible retirement plan:

1. Made on or after the first day of the incident period of 

a qualified disaster and before June 17, 2020 (June 

25, 2021, for a qualified 2020 disaster);

2. Made to an individual whose main home at any time 

during the incident period of such qualified disaster 

was in the qualified disaster area; and

3. That individual sustained an economic loss because 

of the disaster.

Distribution limit for qualified disaster distributions. 

The total of your qualified disaster distributions from all 

plans is limited to $100,000 per disaster for certain major 

disasters that occurred in 2018, 2019, and 2020. If you 

take distributions from more than one type of plan, such 

as a 401(k) plan and an IRA, and the total amount of your 

distributions exceeds $100,000 for a single disaster, you 

may allocate the $100,000 limit among the plans by any 

reasonable method you choose.

Example. In 2020, you received a distribution of 

$50,000. In 2021, you received a distribution of $125,000 

for the same disaster. Separately, each distribution met 

the requirements for a qualified disaster distribution. If you 

had decided to treat the entire $50,000 received in 2020 

as a qualified disaster distribution, only $50,000 of the 

2021 distribution could've been treated as a qualified disaster distribution for the same disaster.

Taxation of Qualified Disaster 

Distributions

Qualified disaster distributions are included in income in 

equal amounts over 3 years. However, if you elect, you 

can include the entire distribution in your income in the 

year it was received.

Qualified disaster distributions aren’t subject to the 

10% additional tax (or the additional 25% tax for certain 

distributions from SIMPLE IRAs) on early distributions 

from qualified retirement plans (including IRAs). Also, if 

you are receiving substantially equal periodic payments 

from a qualified retirement plan, the receipt of a qualified 

disaster distribution from that plan won't be treated as a 

change in those substantially equal payments merely because of the qualified disaster distribution. However, any 

distributions you received in excess of the $100,000 qualified disaster distribution limit may be subject to the additional tax on early distributions.

Repayment of Qualified Disaster 

Distributions

If you choose, you can generally repay any portion of a 

qualified disaster distribution that is eligible for tax-free 

rollover treatment to an eligible retirement plan. Also, you 

can repay a qualified disaster distribution made on account of a hardship from a retirement plan. However, see 

Exceptions, later, for qualified disaster distributions you 

can't repay.

You have 3 years from the day after the date you received the distribution to make a repayment. The amount 

of your repayment can't be more than the amount of the 

original distribution. Amounts that are repaid are treated 

as a trustee-to-trustee transfer and aren't included in income. Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA isn't considered a 

rollover. For more information on how to report distributions and repayments, see the Instructions for Form 

8915-C (in the case of qualified 2018 disasters), the Instructions for Form 8915-D (in the case of qualified 2019 

disasters), or the Instructions for Form 8915-F (in the case 

of qualified disasters that occurred in 2020 and later 

years).

Exceptions. You can't repay the following types of distributions.

1. Qualified disaster distributions received as a beneficiary (other than as a surviving spouse).

2. RMDs.

3. Periodic payments (other than from an IRA) that are 

for:

a. A period of 10 years or more,

b. Your life or life expectancy, or

c. The joint lives or joint life expectancies of you and 

your beneficiary.

Repayment of distributions if reporting under the 

1-year election. If you elect to include all of your qualified disaster distributions received in a year in income for 

that year and then repay any portion of the distributions 

during the allowable 3-year period, the amount repaid will 

reduce the amount included in income for the year of distribution. If the repayment is made after the due date (including extensions) for your return for the year of distribution, you will need to file, with an amended return, a 

revised Form 8915-C (if the repayment is of a qualified 

2018 disaster distribution), a revised Form 8915-D (if the 

repayment is of a qualified 2019 disaster distribution), or a 

Publication 575 (2023) 41
revised Form 8915-F (in the case of qualified disasters 

that occurred in 2020 and later years). See Amending 

Your Return, later.

Example. Maria received a $19,000 qualified disaster 

recovery distribution on February 15, 2023. After receiving 

a reimbursement from her insurance company for a casualty loss, Maria repays the $19,000 qualified disaster recovery distribution on September 10, 2023. She reports 

the distribution and repayment on Form 8915-F, which she 

files with her timely filed 2023 tax return. As a result, no 

portion of the distribution is included in income on her return.

Repayment of distributions if reporting under the 

3-year method. If you are reporting the distribution in income over the 3-year period and you repay any portion of 

the distribution to an eligible retirement plan before filing 

your tax return, the repayment will reduce the portion of 

the distribution that is included in income for the year. If 

you repay a portion after the due date (including extensions) for filing your return, the repayment will reduce the 

portion of the distribution that is included in income on 

your next year’s return, unless you are eligible to amend 

your applicable prior year return or returns. (This would be 

a return for a year beginning the year of the distribution 

and included in the 3-year period.)

If, during a year in the 3-year period, you repay 

more than is otherwise includible in income for 

that year, the excess may be carried forward or 

back to reduce the amount included in income for the 

year.

Example. John received a $18,000 qualified disaster 

recovery distribution on November 15, 2023. He doesn’t 

elect to include the entire distribution in his 2023 income 

but elects to included $6,000 on each of his 2023, 2024, 

and 2025 returns. On November 10, 2024, John repays 

$9,000. He makes no other repayments during the allowable 3-year period. John may report the distribution and repayment in either of the following ways.

• Report $0 in income on his 2024 return and carry the 

$3,000 excess repayment ($9,000 – $6,000) forward 

to 2025 and reduce the amount reported in that year 

to $3,000.

• Report $0 income on his 2024 return, report $6,000 on 

his 2025 return, and file an amended return for 2023 to 

reduce the amount previously included in income to 

$3,000 ($6,000 – $3,000).

Recontribution of Qualified 

Distributions for the Purchase or 

Construction of a Main Home

If you received a qualified distribution to purchase or construct a main home in certain major disaster areas, you 

can repay all or any part of that distribution to an eligible 

retirement plan.

TIP

Applicable recontribution period. You can make this 

recontribution (or recontributions):

• On or after the first day of the incident period of the 

qualified disaster and before June 17, 2020, for qualified 2018 and 2019 disasters;

• On or after the first day of the incident period of the 

qualified disaster and before June 25, 2021, for qualified 2020 disasters; or

• On or after the first day of the incident period of a 

qualified disaster under the SECURE 2.0 Act of 2020 

and ending on the date which is 180 days after the applicable date for that disaster.

Note. A qualified disaster under the SECURE 2.0 Act 

of 2020 is any major disaster declared by the President 

under section 401 of the Robert T. Stafford Disaster Relief 

and Emergency Assistance Act after December 27, 2020.

Qualified home purchase distribution. To be a qualified distribution, the distribution must meet all of the following requirements.

• The distribution is a hardship distribution from a 401(k) 

plan, a hardship distribution from a tax-sheltered annuity plan (403(b) plan), or a qualified first-time homebuyer distribution from an IRA.

• The distribution was received during the period beginning on the date that is 180 days before the first day of 

the incident period of the qualified disaster and ending 

on the date that is 30 days after the last day of such 

incident period.

• The distribution was to be used to purchase or construct a main home in the disaster area and the home 

wasn't purchased or constructed because of the disaster.

Any amount that is recontributed during the applicable 

recontribution period is treated as a trustee-to-trustee 

transfer and is not included in income.

A qualified distribution not recontributed during the applicable recontribution period may be taxable for the year 

distributed and subject to the additional 10% tax (or the 

additional 25% tax for certain SIMPLE IRAs) on early distributions.

See Form 8915-C (for qualified 2018 disaster distributions), Form 8915-D (for qualified 2019 disaster distributions), or Form 8915-F (for qualified 2020 disaster distributions) if you received a qualified distribution that you 

recontributed, in whole or in part, before the applicable recontribution period. See Form 8915-F for qualified disasters that occur after January 25, 2021.

Loans From Qualified Plans

The following special rules are available to qualified individuals.

• Increase to the limit for loans from employer retirement 

plans.

42 Publication 575 (2023)
• A 1-year suspension for payments due on plan loans.

Qualified individual. You are a qualified individual if both 

of the following apply.

1. Your principal residence at any time during that disaster’s incident period is located in the qualified disaster 

area with respect to the disaster.

2. You have experienced an economic loss because of 

the disaster.

Examples of an economic loss include, but aren't limited to:

• Loss, damage to, or destruction of real or personal 

property from fire, flooding, looting, vandalism, theft, 

wind, or other cause;

• Loss related to displacement from your home; or

• Loss of livelihood due to temporary or permanent layoffs.

Limits on plan loans. The $50,000 limit on plan loans is 

increased to a maximum of $100,000. Also, the additional 

50% of the present value of your nonforfeitable vested accrued benefit limit is increased to 100%.

The higher limits apply to loans made during the following periods.

• Loans made during the period beginning on September 29, 2017 (or February 9, 2018, if in the California 

wildfire disaster area), and ending on December 31, 

2018.

• Loans made during the period beginning on December 20, 2019, and ending on June 17, 2020, for qualified 2018 and 2019 disasters.

• Loans made during the period beginning December 

27, 2020, and ending on June 24, 2021, for qualified 

2020 disasters.

• Loans made during the incident period of a disaster 

beginning on or after January 26, 2021, and ending 

180 days after the applicable date for that disaster.

The applicable date for a qualified disaster would be 

the latest of:

• January 26, 2021;

• The first day of the incident period with respect to the 

qualified disaster; or

• The date of the declaration with respect to the qualified disaster.

1-year suspension of plan loan payments. Payments 

on loans that become due during the period beginning on 

the qualified beginning date and ending on the date that is 

180 days after the last day of the incident period may be 

suspended for 1 year (suspension period) by the administrator. The qualified beginning date is:

• The first day of the incident period of a qualified 2018, 

2019, or 2020 disaster; or

• The first day of the incident period of a qualified disaster that was declared by the President under section 

401 of the Robert T. Stafford Disaster Relief and 

Emergency Assistance Act after December 27, 2020, 

and which begins on or after January 26, 2021.

If you are a qualified individual based on more than one 

disaster, use the suspension period with the earliest beginning date.

Coronavirus-Related Distributions

In tax year 2020, you were able to take a coronavirus-related distribution from a retirement plan if that distribution 

was made:

1. Before December 31, 2020; and

2. To a qualified individual.

Generally, you were a qualified individual if you, your 

spouse, or dependent was diagnosed with the virus 

SARS-CoV-2 or with coronavirus disease 2019 

(COVID-19) or if you experienced adverse financial consequences as a result of the coronavirus pandemic.

Repayment of Qualified 

Coronavirus-Related Distributions

The 1-year election. If you made a qualified coronavirus-related distribution before December 31, 2020, you 

could elect to include all that distribution in your income 

for 2020 and then repay any portion of it during the allowable 3-year period. The amount repaid reduces the amount 

included in income for the year of the distribution.

The 3-year election. If you are reporting the qualified coronavirus-related distribution in income over a 3-year period and, during a year in the 3-year period, you repay 

more than is otherwise includible income for that year, the 

excess may be carried forward or back to reduce the 

amount included in income for the year.

If the repayment is made after the due date (including 

extensions) for your return for the year of distribution, you 

will need to file a revised Form 8915-F. See Amending 

Your Return, later.

Other Disaster Issues

Amending Your Return

If, after filing your original return, you make a repayment, 

the repayment may reduce the amount of your qualified 

disaster distributions that were previously included in income. Depending on when a repayment is made, you may 

need to file an amended tax return to refigure your taxable 

income.

If you make a repayment by the due date of your original return (including extensions), include the repayment 

on your amended return.

Publication 575 (2023) 43
If you make a repayment after the due date of your original return (including extensions), include it on your amended return only if either of the following applies.

• You elected to include all of your qualified disaster distributions in income in the year of the distributions (not 

over 3 years) on your original return.

• The amount of the repayment exceeds the portion of 

the qualified disaster distributions that is includible in 

income for 2021 and you choose to carry the excess 

back to your 2019 or 2020 tax return.

Example. You received a qualified disaster distribution 

in the amount of $90,000 on October 16, 2019. You chose 

to spread the $90,000 over 3 years ($30,000 in income for 

2019, 2020, and 2021). On November 19, 2021, you 

made a repayment of $45,000. For 2021, none of the 

qualified disaster distribution was includible in income. 

The excess repayment of $15,000 could've been carried 

back to 2020 or 2019, as applicable.

File Form 1040-X to amend a return you have already 

filed. Generally, Form 1040-X must be filed within 3 years 

after the date the original return was filed, or within 2 years 

after the date the tax was paid, whichever is later.

Information for Eligible Retirement Plans

A plan administrator may choose whether to treat a distribution as a qualified 2018, 2019, or 2020 disaster distribution, or whether to accept a rollover of a qualified disaster 

distribution and may develop reasonable procedures for 

determining whether distributions are qualified disaster 

distributions. However, the treatment of qualified disaster 

distributions must be consistent under each plan. The 

payment of a qualified disaster distribution to an individual 

must be reported on Form 1099-R. This reporting is required even if the individual recontributes the qualified disaster distribution to the same plan in the same year. If a 

payer is treating the payment as a qualified disaster distribution and no other appropriate code applies, the payer is 

permitted to use distribution code “2” (early distribution, 

exception applies) in box 7 of Form 1099-R. However, a 

payer in this case is also permitted to use distribution 

code “1” (early distribution, no known exception) in box 7 

of Form 1099-R.

Mandatory 60-Day Postponement

Certain taxpayers affected by a federally declared disaster 

that occurs after December 20, 2019, may be eligible for a 

mandatory 60-day postponement for certain tax deadlines 

such as filing or paying income, , and employment taxes; 

and making contributions to a traditional IRA or Roth IRA.

The period beginning on the earliest incident date 

specified in the disaster declaration and ending on the 

date that is 60 days after either the earliest incident date 

or the date of the declaration, whichever is later, is the period during which the deadlines are postponed. For information about disaster relief available in your area, including extensions, go to IRS News Around the Nation.

How To Get Tax Help

If you have questions about a tax issue; need help preparing your tax return; or want to download free publications, 

forms, or instructions, go to IRS.gov to find resources that 

can help you right away.

Preparing and filing your tax return. After receiving all 

your wage and earnings statements (Forms W-2, W-2G, 

1099-R, 1099-MISC, 1099-NEC, etc.); unemployment 

compensation statements (by mail or in a digital format) or 

other government payment statements (Form 1099-G); 

and interest, dividend, and retirement statements from 

banks and investment firms (Forms 1099), you have several options to choose from to prepare and file your tax return. You can prepare the tax return yourself, see if you 

qualify for free tax preparation, or hire a tax professional to 

prepare your return.

Free options for tax preparation. Your options for preparing and filing your return online or in your local community, if you qualify, include the following.

• Free File. This program lets you prepare and file your 

federal individual income tax return for free using software or Free File Fillable Forms. However, state tax 

preparation may not be available through Free File. Go 

to IRS.gov/FreeFile to see if you qualify for free online 

federal tax preparation, e-filing, and direct deposit or 

payment options.

• VITA. The Volunteer Income Tax Assistance (VITA) 

program offers free tax help to people with 

low-to-moderate incomes, persons with disabilities, 

and limited-English-speaking taxpayers who need 

help preparing their own tax returns. Go to IRS.gov/

VITA, download the free IRS2Go app, or call 

800-906-9887 for information on free tax return preparation.

• TCE. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly 

those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors. 

Go to IRS.gov/TCE or download the free IRS2Go app 

for information on free tax return preparation.

• MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military 

OneSource. For more information, go to 

MilitaryOneSource (MilitaryOneSource.mil/MilTax).

Also, the IRS offers Free Fillable Forms, which can 

be completed online and then e-filed regardless of income.

Using online tools to help prepare your return. Go to 

IRS.gov/Tools for the following.

• The Earned Income Tax Credit Assistant (IRS.gov/

EITCAssistant) determines if you’re eligible for the 

earned income credit (EIC).

44 Publication 575 (2023)
• The Online EIN Application (IRS.gov/EIN) helps you 

get an employer identification number (EIN) at no 

cost.

• The Tax Withholding Estimator (IRS.gov/W4App) 

makes it easier for you to estimate the federal income 

tax you want your employer to withhold from your paycheck. This is tax withholding. See how your withholding affects your refund, take-home pay, or tax due.

• The First-Time Homebuyer Credit Account Look-up 

(IRS.gov/HomeBuyer) tool provides information on 

your repayments and account balance.

• The Sales Tax Deduction Calculator (IRS.gov/

SalesTax) figures the amount you can claim if you 

itemize deductions on Schedule A (Form 1040).

Getting answers to your tax questions. On 

IRS.gov, you can get up-to-date information on 

current events and changes in tax law.

• IRS.gov/Help: A variety of tools to help you get answers to some of the most common tax questions.

• IRS.gov/ITA: The Interactive Tax Assistant, a tool that 

will ask you questions and, based on your input, provide answers on a number of tax topics.

• IRS.gov/Forms: Find forms, instructions, and publications. You will find details on the most recent tax 

changes and interactive links to help you find answers 

to your questions.

• You may also be able to access tax information in your 

e-filing software.

Need someone to prepare your tax return? There are 

various types of tax return preparers, including enrolled 

agents, certified public accountants (CPAs), accountants, 

and many others who don’t have professional credentials. 

If you choose to have someone prepare your tax return, 

choose that preparer wisely. A paid tax preparer is:

• Primarily responsible for the overall substantive accuracy of your return,

• Required to sign the return, and

• Required to include their preparer tax identification 

number (PTIN).

Although the tax preparer always signs the return, 

you're ultimately responsible for providing all the 

information required for the preparer to accurately 

prepare your return and for the accuracy of every item reported on the return. Anyone paid to prepare tax returns 

for others should have a thorough understanding of tax 

matters. For more information on how to choose a tax preparer, go to Tips for Choosing a Tax Preparer on IRS.gov.

Employers can register to use Business Services Online. The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure 

W-2 filing options to CPAs, accountants, enrolled agents, 

and individuals who process Form W-2, Wage and Tax 

CAUTION

!

Statement, and Form W-2c, Corrected Wage and Tax 

Statement.

IRS social media. Go to IRS.gov/SocialMedia to see the 

various social media tools the IRS uses to share the latest 

information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our 

highest priority. We use these tools to share public information with you. Don’t post your social security number 

(SSN) or other confidential information on social media 

sites. Always protect your identity when using any social 

networking site.

The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, 

Spanish, and ASL.

• Youtube.com/irsvideos.

• Youtube.com/irsvideosmultilingua.

• Youtube.com/irsvideosASL.

Watching IRS videos. The IRS Video portal 

(IRSVideos.gov) contains video and audio presentations 

for individuals, small businesses, and tax professionals.

Online tax information in other languages. You can 

find information on IRS.gov/MyLanguage if English isn’t 

your native language.

Free Over-the-Phone Interpreter (OPI) Service. The 

IRS is committed to serving taxpayers with limited-English 

proficiency (LEP) by offering OPI services. The OPI Service is a federally funded program and is available at Taxpayer Assistance Centers (TACs), most IRS offices, and 

every VITA/TCE tax return site. The OPI Service is accessible in more than 350 languages.

Accessibility Helpline available for taxpayers with 

disabilities. Taxpayers who need information about accessibility services can call 833-690-0598. The Accessibility Helpline can answer questions related to current and 

future accessibility products and services available in alternative media formats (for example, braille, large print, 

audio, etc.). The Accessibility Helpline does not have access to your IRS account. For help with tax law, refunds, or 

account-related issues, go to IRS.gov/LetUsHelp.

Note. Form 9000, Alternative Media Preference, or 

Form 9000(SP) allows you to elect to receive certain types 

of written correspondence in the following formats.

• Standard Print.

• Large Print.

• Braille.

• Audio (MP3).

• Plain Text File (TXT).

• Braille Ready File (BRF).

Disasters. Go to IRS.gov/DisasterRelief to review the 

available disaster tax relief.

Publication 575 (2023) 45
Getting tax forms and publications. Go to IRS.gov/

Forms to view, download, or print all the forms, instructions, and publications you may need. Or, you can go to 

IRS.gov/OrderForms to place an order.

Getting tax publications and instructions in eBook 

format. Download and view most tax publications and instructions (including the Instructions for Form 1040) on 

mobile devices as eBooks at IRS.gov/eBooks.

IRS eBooks have been tested using Apple's iBooks for 

iPad. Our eBooks haven’t been tested on other dedicated 

eBook readers, and eBook functionality may not operate 

as intended.

Access your online account (individual taxpayers 

only). Go to IRS.gov/Account to securely access information about your federal tax account.

• View the amount you owe and a breakdown by tax 

year.

• See payment plan details or apply for a new payment 

plan.

• Make a payment or view 5 years of payment history 

and any pending or scheduled payments.

• Access your tax records, including key data from your 

most recent tax return, and transcripts.

• View digital copies of select notices from the IRS.

• Approve or reject authorization requests from tax professionals.

• View your address on file or manage your communication preferences.

Get a transcript of your return. With an online account, 

you can access a variety of information to help you during 

the filing season. You can get a transcript, review your 

most recently filed tax return, and get your adjusted gross 

income. Create or access your online account at IRS.gov/

Account.

Tax Pro Account. This tool lets your tax professional 

submit an authorization request to access your individual 

taxpayer IRS online account. For more information, go to 

IRS.gov/TaxProAccount.

Using direct deposit. The safest and easiest way to receive a tax refund is to e-file and choose direct deposit, 

which securely and electronically transfers your refund directly into your financial account. Direct deposit also 

avoids the possibility that your check could be lost, stolen, 

destroyed, or returned undeliverable to the IRS. Eight in 

10 taxpayers use direct deposit to receive their refunds. If 

you don’t have a bank account, go to IRS.gov/

DirectDeposit for more information on where to find a bank 

or credit union that can open an account online.

Reporting and resolving your tax-related identity 

theft issues. 

• Tax-related identity theft happens when someone 

steals your personal information to commit tax fraud. 

Your taxes can be affected if your SSN is used to file a 

fraudulent return or to claim a refund or credit.

• The IRS doesn’t initiate contact with taxpayers by 

email, text messages (including shortened links), telephone calls, or social media channels to request or 

verify personal or financial information. This includes 

requests for personal identification numbers (PINs), 

passwords, or similar information for credit cards, 

banks, or other financial accounts.

• Go to IRS.gov/IdentityTheft, the IRS Identity Theft 

Central webpage, for information on identity theft and 

data security protection for taxpayers, tax professionals, and businesses. If your SSN has been lost or 

stolen or you suspect you’re a victim of tax-related 

identity theft, you can learn what steps you should 

take.

• Get an Identity Protection PIN (IP PIN). IP PINs are 

six-digit numbers assigned to taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns. When you have an IP PIN, it prevents someone else from filing a tax return with your 

SSN. To learn more, go to IRS.gov/IPPIN.

Ways to check on the status of your refund. 

• Go to IRS.gov/Refunds.

• Download the official IRS2Go app to your mobile device to check your refund status.

• Call the automated refund hotline at 800-829-1954.

The IRS can’t issue refunds before mid-February 

for returns that claimed the EIC or the additional 

child tax credit (ACTC). This applies to the entire 

refund, not just the portion associated with these credits.

Making a tax payment. Payments of U.S. tax must be 

remitted to the IRS in U.S. dollars. Digital assets are not 

accepted. Go to IRS.gov/Payments for information on how 

to make a payment using any of the following options.

• IRS Direct Pay: Pay your individual tax bill or estimated 

tax payment directly from your checking or savings account at no cost to you.

• Debit Card, Credit Card, or Digital Wallet: Choose an 

approved payment processor to pay online or by 

phone.

• Electronic Funds Withdrawal: Schedule a payment 

when filing your federal taxes using tax return preparation software or through a tax professional.

• Electronic Federal Tax Payment System: Best option 

for businesses. Enrollment is required.

• Check or Money Order: Mail your payment to the address listed on the notice or instructions.

• Cash: You may be able to pay your taxes with cash at 

a participating retail store.

• Same-Day Wire: You may be able to do same-day 

wire from your financial institution. Contact your financial institution for availability, cost, and time frames.

CAUTION

!

46 Publication 575 (2023)
Note. The IRS uses the latest encryption technology to 

ensure that the electronic payments you make online, by 

phone, or from a mobile device using the IRS2Go app are 

safe and secure. Paying electronically is quick, easy, and 

faster than mailing in a check or money order.

What if I can’t pay now? Go to IRS.gov/Payments for 

more information about your options.

• Apply for an online payment agreement (IRS.gov/

OPA) to meet your tax obligation in monthly installments if you can’t pay your taxes in full today. Once 

you complete the online process, you will receive immediate notification of whether your agreement has 

been approved.

• Use the Offer in Compromise Pre-Qualifier to see if 

you can settle your tax debt for less than the full 

amount you owe. For more information on the Offer in 

Compromise program, go to IRS.gov/OIC.

Filing an amended return. Go to IRS.gov/Form1040X 

for information and updates.

Checking the status of your amended return. Go to 

IRS.gov/WMAR to track the status of Form 1040-X amended returns.

It can take up to 3 weeks from the date you filed 

your amended return for it to show up in our system, and processing it can take up to 16 weeks.

Understanding an IRS notice or letter you’ve received. Go to IRS.gov/Notices to find additional information about responding to an IRS notice or letter.

Responding to an IRS notice or letter. You can now 

upload responses to all notices and letters using the 

Document Upload Tool. For notices that require additional 

action, taxpayers will be redirected appropriately on 

IRS.gov to take further action. To learn more about the 

tool, go to IRS.gov/Upload.

Note. You can use Schedule LEP (Form 1040), Request for Change in Language Preference, to state a preference to receive notices, letters, or other written communications from the IRS in an alternative language. You may 

not immediately receive written communications in the requested language. The IRS’s commitment to LEP taxpayers is part of a multi-year timeline that began providing 

translations in 2023. You will continue to receive communications, including notices and letters, in English until they 

are translated to your preferred language.

Contacting your local TAC. Keep in mind, many questions can be answered on IRS.gov without visiting a TAC. 

Go to IRS.gov/LetUsHelp for the topics people ask about 

most. If you still need help, TACs provide tax help when a 

tax issue can’t be handled online or by phone. All TACs 

now provide service by appointment, so you’ll know in advance that you can get the service you need without long 

wait times. Before you visit, go to IRS.gov/TACLocator to 

find the nearest TAC and to check hours, available services, and appointment options. Or, on the IRS2Go app, 

CAUTION

!

under the Stay Connected tab, choose the Contact Us option and click on “Local Offices.”

The Taxpayer Advocate Service (TAS) 

Is Here To Help You

What Is TAS?

TAS is an independent organization within the IRS that 

helps taxpayers and protects taxpayer rights. TAS strives 

to ensure that every taxpayer is treated fairly and that you 

know and understand your rights under the Taxpayer Bill 

of Rights.

How Can You Learn About Your Taxpayer 

Rights?

The Taxpayer Bill of Rights describes 10 basic rights that 

all taxpayers have when dealing with the IRS. Go to 

TaxpayerAdvocate.IRS.gov to help you understand what 

these rights mean to you and how they apply. These are 

your rights. Know them. Use them.

What Can TAS Do for You?

TAS can help you resolve problems that you can’t resolve 

with the IRS. And their service is free. If you qualify for 

their assistance, you will be assigned to one advocate 

who will work with you throughout the process and will do 

everything possible to resolve your issue. TAS can help 

you if:

• Your problem is causing financial difficulty for you, 

your family, or your business;

• You face (or your business is facing) an immediate 

threat of adverse action; or

• You’ve tried repeatedly to contact the IRS but no one 

has responded, or the IRS hasn’t responded by the 

date promised.

How Can You Reach TAS?

TAS has offices in every state, the District of Columbia, 

and Puerto Rico. To find your advocate’s number:

• Go to TaxpayerAdvocate.IRS.gov/Contact-Us;

• Download Pub. 1546, The Taxpayer Advocate Service 

Is Your Voice at the IRS, available at IRS.gov/pub/irspdf/p1546.pdf;

• Call the IRS toll free at 800-TAX-FORM 

(800-829-3676) to order a copy of Pub. 1546;

• Check your local directory; or

• Call TAS toll free at 877-777-4778.

How Else Does TAS Help Taxpayers?

TAS works to resolve large-scale problems that affect 

many taxpayers. If you know of one of these broad issues, 

report it to TAS at IRS.gov/SAMS. Be sure to not include 

any personal taxpayer information.

Publication 575 (2023) 47
Low Income Taxpayer Clinics (LITCs)

LITCs are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level 

and who need to resolve tax problems with the IRS. LITCs 

can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, 

LITCs can provide information about taxpayer rights and 

responsibilities in different languages for individuals who 

speak English as a second language. Services are offered 

for free or a small fee. For more information or to find an 

LITC near you, go to the LITC page at 

TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134, 

Low Income Taxpayer Clinic List, at IRS.gov/pub/irs-pdf/

p4134.pdf.

48 Publication 575 (2023)
Worksheet A. Simplified Method Keep for Your Records

1. Enter the total pension or annuity payments received this year. Also, add this amount to the total for 

Form 1040, 1040-SR, or 1040-NR, line 5a ................................................ 1.

2. Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion.* 

See Cost (Investment in the Contract) ................................................... 2.

Note: If your annuity starting date was before this year and 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.

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 .............................................................................. 3.

4. Divide line 2 by the number on line 3 .................................................... 4.

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, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. 

Otherwise, go to line 6 ................................................................ 5.

6. Enter any amounts previously recovered tax free in years after 1986. This is the amount shown on 

line 10 of your worksheet for last year .................................................... 6.

7. Subtract line 6 from line 2 ............................................................. 7.

8. Enter the smaller of line 5 or line 7 ...................................................... 8.

9. Taxable amount for year. Subtract line 8 from line 1. Enter the result, but not less than zero. Also, 

add this amount to the total for Form 1040, 1040-SR, or 1040-NR, line 5b. 

Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line 

instead. If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety 

Officers before entering an amount on your tax return ...................................... 9.

10. Was your annuity starting date before 1987?

 Yes. STOP. Don’t complete the rest of this worksheet.

 No. Add lines 6 and 8. This is the amount you have recovered tax free through 2023. You will need 

this number if you need to fill out this worksheet next year ................................... 10.

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 ....... 11.

* A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996.

Table 1 for Line 3 Above

AND your annuity starting date was—

IF the age at annuity

starting date was...

BEFORE November 19,

1996, enter on line 3...

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

Publication 575 (2023) 49
Recapture Allocation Chart Keep for Your Records

Tax Year Taxable Nontaxable (Basis)

2010 Form 8606, line 23 ........ Form 8606, line 22 ...........

2011 Form 1040, line 16b;* Form 

1040A, line 12b;* or Form 

1040NR, line 17b* .........

Form 1040, line 16a;** Form 

1040A, line 12a;** or Form 

1040NR, line 17a** ...........

2012 Form 1040, line 16b;* Form 

1040A, line 12b;* or Form 

1040NR, line 17b* .........

Form 1040, line 16a;** Form 

1040A, line 12a;** or Form 

1040NR, line 17a** ...........

2013 Form 1040, line 16b;* Form 

1040A, line 12b;* or Form 

1040NR, line 17b* .........

Form 1040, line 16a;** Form 

1040A, line 12a;** or Form 

1040NR, line 17a** ...........

2014 Form 1040, line 16b;* Form 

1040A, line 12b;* or Form 

1040NR, line 17b* .........

Form 1040, line 16a;** Form 

1040A, line 12a;** or Form 

1040NR, line 17a** ...........

2015 Form 1040, line 16b;* Form 

1040A, line 12b;* or Form 

1040NR, line 17b* .........

Form 1040, line 16a;** Form 

1040A, line 12a;** or Form 

1040NR, line 17a** ...........

2016 Form 1040, line 16b;* Form 

1040A, line 12b;* or Form 

1040NR, line 17b* .........

Form 1040, line 16a;** Form 

1040A, line 12a;** or Form 

1040NR, line 17a** ...........

2017 Form 1040, line 16b;* Form 

1040A, line 12b;* or Form 

1040NR, line 17b* .........

Form 1040, line 16a;** Form 

1040A, line 12a;** or Form 

1040NR, line 17a** ...........

2018 Form 1040, line 4b;* or 

Form 1040NR, 

line 17b* .................

Form 1040, line 4a;** or Form 

1040NR, line 17a** ...........

2019 Form 1040, line 4d;* or 

Form 1040-NR, 

line 17b* .................

Form 1040, line 4c;** or Form 

1040-NR, line 17a** ..........

2020 Form 1040, 1040-SR, or 

1040-NR, line 5b* .........

Form 1040, 1040-SR, or 

1040-NR, line 5a** ...........

2021 Form 1040, 1040-SR, or 

1040-NR, line 5b* .........

Form 1040, 1040-SR, or 

1040-NR, line 5a** ...........

2022 Form 1040, 1040-SR, or 

1040-NR, line 5b* .........

Form 1040, 1040-SR, or 

1040-NR, line 5a** ...........

2023 Form 1040, 1040-SR, or 

1040-NR, line 5b* .........

Form 1040, 1040-SR, or 

1040-NR, line 5a** ...........

Total ..................... Total ........................

Note. The sum of the totals for each column should equal the amount reported in box 10 of your 2023 Form 1099-R.

* Only include those amounts attributable to an in-plan Roth rollover.

** Only include any contributions (usually box 5 of Form 1099-R) that were taxable to you when made and attributable to an in-plan 

Roth rollover.

50 Publication 575 (2023)
To help us develop a more useful index, please let us know if you have ideas for index entries.

Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

10% tax for early withdrawal 29

403(b) plans:

Defined 4

Loans from, without tax 

consequences 18

Simplified Method to be used 13

5% owners 37

A

Alimony (See Qualified domestic relations 

orders (QDROs))

Amending your return 43

Annuities

5% rate on early distributions 33

Defined 4

Fixed-period 4, 13

Guaranteed payments 39

Joint and survivor annuities 4

Minimum distributions from 38

Payments under 5

Qualified plan annuity starting before 

November 19, 1996 12

Rollovers 30

Single-life 4, 13

Starting date of 11, 13, 16

Before November 19, 1996 14

Distribution on or after 16

Transfers of contracts 19

Types of 4

Variable annuities 4, 5

Assistance (See Tax help)

B

Beneficiaries 38

C

Capital gains:

Lump-sum distributions 22

Cash withdrawals (See Nonperiodic 

payments)

Certain firefighters:

Distributions to 36

Child support (See Qualified domestic 

relations orders (QDROs))

Coronavirus-Related Distributions 43

Corrective distributions of excess plan 

contributions 14

Costs:

Investment in the contract 10

Lump-sum distribution, determination 

for 22

D

Death benefits 5

Death of employee 37, 39

Death of retiree 39

Deductible voluntary employee 

contributions 12

Defined contribution plans 17

Designated Roth accounts:

Costs 11

Defined 4

Qualified distributions 11

Rollovers 31

Disability pensions 4, 6

Disabled 34

Disaster-related relief 39

Distributions 27

(See also Rollovers)

Beginning date for 37

Early distributions and penalty tax 29, 

33

Employer securities 16

Loans treated as 18

Lump-sum 16, 20-26

Minimum required 37

Nonperiodic, taxation of 14

Periodic, taxation of 11

Qualified public safety employees 35

Qualified reservist 36

U.S. savings bonds 18

Dividends 14

E

Early withdrawal from deferred interest 

account:

Penalty tax on 29, 33

Eligible retirement plan 44

Employer securities, distributions 

of 16

Estate tax 23

Deduction 38

Estimated tax 10

Excess accumulation, tax on 37

Excess plan contributions, corrective 

distributions of 14

F

Figuring taxable amount 16-18

Fixed-period annuities 4, 13

Foreign employment contributions 11

Form:

4972 21

W-4P 9

Form 1040:

Rollovers 31

Form 1040-X:

Changing your mind on lump-sum 

treatment 22

Form 1099-INT:

U.S. savings bonds distributions 18

Form 1099-R:

10-year tax option for lump-sum 

distribution 23

Corrected form 2

Corrective distributions of excess plan 

contributions 16

Exceptions to tax 34

Investment in the contract 11

Loan treated as distribution from 

plan 19

Rollovers 31

Tax-free exchanges 20

Form 4972:

10-year tax option for lump-sum 

distribution 23

Lump-sum distributions 21, 22

Form 5329:

Recapture tax 37

Special additional taxes (penalty 

taxes) 33, 34

Form RRB-1099-R 7

Form W-4P:

Withholding from retirement plan 

payments 9, 10

Form W-4V:

Voluntary withholding request for social 

security or railroad retirement 

benefits 10

Frozen deposits 29

Fully taxable payments 12

G

General Rule 12, 14

Death of retiree under 39

Investment in the contract, 

determination of 10

Guaranteed payments 13

H

Home purchase:

Loans from qualified plans for 18

I

In-plan Roth rollovers 31

Individual retirement accounts:

Minimum distributions from 38

Rollovers 28

Interest deduction:

Denial on loan from plan 19

J

Joint and survivor annuities 4

L

Loans treated as distributions 18

Local government employees:

Section 457 plans 5

Losses:

Lump-sum distribution 22

Lump-sum distributions 16, 20-26

10-year tax option 23

Capital gain treatment 22

Defined 20

Election of 22

Form 4972 21

M

Mandatory 60-day postponement 44

Military and government disability 

pensions:

Service-connected disability 6

Minimum required distributions 37

Missing children, photographs of 2

Multiple annuitants 14

Multiple-lives annuities 13

N

Net Investment Income Tax 5, 18

Net unrealized appreciation (NUA) 22

Publication 575 (2023) 51
Deferring tax on 16

Nonperiodic payments:

Loan treated as 18

Taxation of 14

Nonqualified plans:

Distribution before annuity start date 17

General Rule to be used 14

Loans treated as distributions from 19

Nonresident aliens:

Railroad retirement 7

P

Partial rollovers 29

Partly taxable payments 12

Penalty taxes:

Early distributions 33

Excess accumulation 37

Pensions:

Defined 4

Disability pensions 4, 6

Types of 4

Periodic payments:

Taxation of 11

Withholding tax 10

Plan loan offset 29

Public safety officers insurance 

premiums 6

Public school employees:

Tax-sheltered annuity plans for 

(See 403(b) plans)

Publications (See Tax help)

Q

Qualified disaster distributions 40

Qualified domestic relations orders 

(QDROs) 4, 30

Alternate payee under and lump-sum 

distribution 21

Qualified employee annuities:

Defined 4

Simplified Method to be used 13

Qualified employee plans:

Defined 4

Simplified Method to be used 13

Qualified plans 14

(See also specific type of plan)

Distribution before annuity starting 

date 17

General Rule 14

Loans from, without tax 

consequences 18

Rollovers 28

Qualified public safety employees:

Distributions to 35, 36

Qualified settlement income:

Exxon Valdez litigation settlement 32

R

Railroad retirement benefits 6-9

Taxability of 10

Recapture tax:

Changes in distribution method 36

Recontribution of Qualified 

Distributions:

Purchase or Construction of a Main 

Home 42

Reemployment 21

Related employers and related 

plans 19

Repayment of loan within 5 years 18

Required beginning date 37

Required distributions, minimum 37

Retirement bonds 30

Rollovers 28-32

20% tax rate on distribution 10

Comparison of direct payment vs. direct 

rollover (Table 1) 32

Direct rollover to another qualified 

plan 10, 29

In-plan Roth 31

Nonspouse beneficiary 30

Nontaxable amounts 28

Notice to recipients of eligible rollover 

distribution 31

Property and cash distributed 30

Roth IRAs 32

Substitution of other property 30

Surviving spouse making 30

S

Section 457 deferred compensation 

plans 5

Securities of employer, distributions 

of 16

Self-employed persons' rollovers 28

Separation from service 35

Service-connected disability 6

Simplified Method 12, 13

Death of retiree under 39

How to use 13

Investment in the contract, 

determination of 10

Not allowed 13

Single-sum in connection with start of 

payments 17

Single-life annuities 4, 13

Social security, tax on 10

State employees:

Section 457 plans 5

State insurer delinquency 

proceedings 37

Surviving spouse:

Distribution rules for 38

Rollovers by 30

T

Tables:

Comparison of direct payment vs. direct 

rollover (Table 1) 32

Tax help 44

Tax-free exchanges 19

Ten percent tax for early withdrawal 33

Ten-year tax option 23

Terminally ill individuals:

Distributions to 34

Time for making rollover 29

Transfers of annuity contracts 19

U

U.S. savings bonds:

Distribution of 18

V

Variable annuities 4, 5

Voluntary employee contributions 12

W

Withdrawals 5

Employees withdrawing 

contributions 17

Withholding 9

10% rate used 10

20% of eligible rollover 28, 29, 31

Periodic payments 10

Railroad retirement 7

Worksheets:

Simplified Method 13

Worksheet A, illustrated 15

Worksheet A, Simplified Method 49

52 Publication 575 (2023)