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Every January IMRF will provide you with a 1099-R
tax statement showing the gross amount of benefits you received the
previous year. This form also will indicate the taxable portion of your
pension as well as any federal income tax that may have been withheld
from your payments. The information on this form should be used for
filing your federal and state income tax returns.
With a Member Access account, you can get early access to your 1099-R and other important documents. Register today!
IMRF will report the taxable amount of your pension
on your 1099-R using the method indicated on your Certificate
of Benefits.
You must use Internal Revenue Service Form 1040
or Form 1040A, “U.S. Individual Income Tax Return,” when you
file your annual federal tax return.
You
cannot use Form 1040EZ.
In order to properly report your IMRF pension, report
the total amount received on the line designated for pensions and annuities.
This was line 16a on the 2009 Form 1040 or line 12a on the 2009 Form
1040A. The pension line of these forms have two boxes. “Box a”
is for the gross amount of pension received, and “Box b” is
for the taxable portion of your pension payments. If you need tax forms,
go to the IRS website.
Member
contributions to IMRF are considered tax-deferred as retirement savings.
Most tax-deferred retirement savings are subject to a 10% early withdrawal
tax when taken out of the retirement plan before the recipient is age
59-1/2. However, there is an exception to this early withdrawal tax
for IMRF pension payments that begin no earlier than age 55 (age 50
for public safety employees)—if you have totally separated
from service with your last IMRF employer.
If
you do not separate from service with your last IMRF employer, and instead
continue to work for this employer in a non-participating position while
receiving your pension payments at the same time, you are not
eligible for this exception. In this situation, you must pay
the additional 10% early withdrawal tax on your monthly IMRF pension
payments. You will be required to pay this additional tax until you
reach age 59-1/2 or until you leave employment with your IMRF employer.
Please note: The above situation assumes that you have
already contacted IMRF and verified that you could continue to work
after retirement without your pension being suspended.
Your pension is not subject
to Illinois state income tax. Rules in other states vary. To find out
if your pension is subject to state tax and how your pension income
must be reported on your state income tax return, you can view
IMRF's most current list. NOTE: Please check with that state’s
department of revenue for the most up-to-date information before making
a final decision.
Because your IMRF pension
is not subject to Illinois state income tax, you should enter the federally
taxed portion of your pension (from your Form 1099-R) as a subtraction
on Form IL-1040, “Illinois Individual Income Tax Return.”
This line is designated as retirement and Social Security income (line
5 on the 2009 IL-1040).
In order to show that your
IMRF pension is subtractable, you must include a copy of page one of
your US 1040 or 1040A form with your Illinois state income tax return.
If you fail to attach a copy of the US 1040 or 1040A, your entry will
not be allowed.
Please
note: Even though
you may have no other taxable income, the Illinois Department of Revenue
requires that you file a return if you are an Illinois resident.
Because pension payments
are immediately taxable, you are required by the Internal Revenue Service
to submit a completed Form
W-4P to IMRF.This form is available to complete through your Member Access account.
IMRF is not in a position
to offer tax assistance, and therefore, cannot determine the amount
of withholding that is right for a particular member. If you are not
sure how much money should be withheld from your pension payments in
order to meet your federal tax obligation, you should talk with your
tax consultant.
If you do not return Form
W-4P to IMRF and your pension during 2012 exceeds $1,625.01
a month, IMRF is required by law to withhold an amount based upon
the IRS tax tables. The amount withheld will be based on a married
individual claiming three withholding allowances. If your monthly
pension payments during 2012 are $1,625.01 or less and you have no
withholding request on file, no federal tax will be withheld. The
dollar amount ($1,625.01) will be adjusted each year by the IRS.
Because payments by IMRF
are exempt from Illinois state income tax, IMRF will not honor any request
to withhold state tax (for any state) from your payments.
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