The Simplified Method
Generally, if you begin receiving annuity payments from a qualified retirement plan, you use the Simplified Method to figure the tax-free part of the payments. A qualified retirement plan is a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract (refer to Publication 575 for definitions). Under the Simplified Method, you figure the taxable and tax-free parts of your annuity payments by completing the Simplified Method Worksheet in the Form 1040 Instructions or in Publication 575.
As a rule, retirement age is the earliest age you are eligible to receive a pension or annuity from your employer, if you had not been disabled. If you retire on disability, the payments you receive are taxed as wages until you reach the minimum retirement age.
