Congratulations on your retirement! For the year you retired you will have both earned income and retirement income. This means you have a combination of income sources and they are reported in different sections of the tax return. You will enter your Form W-2 for the part of the year you were still working. Then you will enter your retirement distributions normally received on a 1099-R. You should receive a 1099-R from each institution that paid you pension, annuity, or other retirement plan distributions. Then you will enter your Social Security benefits from the Form SSA-1099.
Going forward you would only have your retirement income from 1099-R & Social Security from SSA-1099, unless you go back to work or begin part-time employment.
Key tax planning tips for your retirement year:
- Be aware of your tax bracket. Taking large, one-time retirement distributions can push you into a higher tax bracket for that year. Taking smaller, more frequent distributions may help you manage your taxable income.
- Use the right type of rollover. When moving your 401(k) to an IRA, always do a direct rollover. If you have the money distributed directly to you, your employer will withhold 20% for taxes, and you only have 60 days to complete the rollover to avoid penalties.
- Factor in your other income sources. Your wages, retirement distributions, and Social Security will combine to determine your total tax liability for the year. This differs from your first full year of retirement when you will no longer have a W-2 to report.
Helpful links:
Publication 17, Social Security and Equivalent Railroad Retirement Benefits
Is my Social Security income taxable?
When Does a Senior Citizen on Social Security Stop Filing Taxes?
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