J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

7.26 Reporting Employee Annuities

Tax treatment of employee annuity payments from a qualified employee plan, qualified employee annuity, or tax-sheltered annuity (7.21) depends on the amount of your contributions and your annuity starting date. These rules are discussed in 7.26 − 7.29. If payments are from a nonqualified employee plan, you must use the rules for commercial annuities (7.23).

Fully taxable payments if you have no investment in the plan.

If you did not contribute to the cost of a pension or employee annuity, and you did not report as income your employer’s contributions, you are fully taxed on payments after the annuity starting date. On your 2012 return, you report fully taxable payments on Line 16b of Form 1040 or Line 12b of Form 1040A.

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Filing Tip

Deducting Repaid Pension Overpayment

If you pay tax on a pension distribution and in the next year the plan determines that there was an overpayment, which you repay, the repayment may be deductible. If the repayment is $3,000 or less, it is deductible as a miscellaneous itemized deduction subject to the 2% floor (19.1), which may limit or eliminate the deduction. If the repayment exceeds $3,000, you may claim either a miscellaneous deduction not subject to the 2% floor, or if it would provide a lower tax for the year of repayment, a tax credit based on a recomputation of the prior year’s tax