Advice for Recent Retirees

People who have recently retired and who want to figure the taxable part of their pensions can save $50 by using a simple new worksheet instead of applying to the Internal Revenue Service for a ruling on the taxation of their pensions.

The IRS is required to charge a $50 user fee for ruling requests on such pension questions but said that most retirees can use this special "safe harbor" method of figuring the taxable amount of their pensions. Although the rule and the worksheet are included in several IRS publications, many retirees may be unaware they can use the simplified method and the worksheet.

The simplified rule and the worksheet are available in several free IRS publications, including Publication 17, "Your Federal Income Tax"; Publication 575, "Pension and Annuity Income"; and Publication 721, "Comprehensive Tax Guide to U. S. Civil Service Retirement Benefits." For most people, this method can replace a more complicated computation for figuring taxation of pensions. If they qualify, taxpayers may use the simplified method regardless of whether the payer of the pension figured a taxable amount by a different method.

Retirees can use the simplified rule if all the following apply:

• the annuity starting date is after July 1, 1986;
• the annuity payments are for either the retiree's life or the lives of the retiree and his or her beneficiary,
• the annuity payments are from a qualified employee plan, an employee annuity or a tax-sheltered annuity, and
• the retiree was under 75 when the annuity payments began or, if the taxpayer was 75 or older, there were less than five years of guaranteed payments.

The IRS is currently contacting taxpayers with pending ruling requests on this issue to see if they wish to use the simplified rule instead. Retirees with questions on their pending ruling requests can call the IRS at (202) 566-4316 (not a toll-free call).

Publications 17, 575 and 721 are available by calling IRS toll free on 1-800-424-3676 or by writing to the following:

If you are located in:               Send your order to:

Alaska, Arizona, California,         Western Area Center
Colorado, Hawaii, Idaho, 	     Distribution
Montana, New Mexico, Nevada, 	     Rancho Cordova, CA
Oregon, Utah, Washington,	     95743-0001
Wyoming

Alabama, Arkansas, Illinois,         Forms Distribution Center
Indiana, Iowa, Kansas, Kentucky,     P. O. Box 9903
Louisiana, Michigan, Minnesota,      Bloomington, IL 61799
Mississippi, Missouri, Nebraska,
North Dakota, Ohio, Oklahoma, South
Dakota, Tennessee, Texas, Wisconsin

Connecticut, Delaware, District of   Forms Distribution Center
Columbia, Florida, Georgia, Maine    P.O. Box 25866
Maryland, Massachusetts, 	     Richmond, VA 23289
New Hampshire, New Jersey, 
New York, North Carolina, 
Pennsylvania, Rhode Island, South
Carolina, Vermont, Virginia, West
Virginia, Foreign Addresses

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