Saving for your retirement has finally paid off! Withdrawals from retirement plans are reported on Form 1099-R. There are a few variations of the form, Form CSA 1099R, Form CSF 1099R, and Form RRB-1099-R, but they all report the same thing. Now that you’re enjoying your hard-earned income, here are some things to keep in mind now that you’re doing your taxes.
1. Your taxable amount depends on which type of plan you withdrew from
There are several different retirement plans, each with their own rules on taxing withdrawn income. On plans like Traditional IRAs and employer pensions, income tax was deferred when you contributed, which means that you’ll now pay tax on the distributions. With plans like Roth IRAs, however, income was already taxed during contribution, and so isn’t taxed now. Qualifying rollovers might also not be taxed, but you still have to report them on your return. Just enter your 1099-R as it appears and answer a few questions—we’ll figure out what, if anything, will be taxed.
2. Early distributions might be penalized
Most withdrawals before the age of 59 ½ are considered early distributions and they’re subject to an additional 10% federal tax on top of the regular income tax rate. Some states also impose a penalty as well. If you withdrew from your retirement because of a hardship like disability or extensive medical expenses, you might not have to pay the same withholding or penalty amounts. Answer a few questions after entering your Form 1099-R and we’ll determine if any penalties apply and if you qualify for any exemptions.
3. You can claim certain credits if you’re over 65
Not only is the standard deduction higher if you’re over 65, but you may also be able to claim the Credit for the Elderly or Disabled. Your eligibility depends on age, income, and filing status, but it can be up to $7,500. After you tell us about yourself, your family, and your income, we’ll determine if you qualify and guide you through claiming the credit.