Answers to Your Questions about Form 1099-R

Date: Feb 13, 2015

 

IRS Form 1099-R’s were mailed to eligible SDCERS Members in January. The following notice provides members with additional information to assist in the completion of tax returns. If you have additional questions, please submit your questions via the Contact Us link located in the upper left of this page, or call SDCERS Call Center at 619-525-3600.
 
Frequently Asked Questions regarding IRS Form 1099-R
 
Why have I received two 1099-R statements?
You’ll receive two statements for the year in which you turn age 59 ½.  The IRS considers age 59 ½ to be the normal retirement age, and ordinarily imposes a penalty for any retirement distributions paid to people younger than that age. Because the SDCERS plan allows for Members to retire before age 59 ½ without penalty,  such Members under age 59 ½ receive a 1099-R with Box 7 listing Distribution Code 2, “Early Distribution with Exception.”
 
For those older than 59 ½, Box 7 lists Distribution Code 7, “Normal Distribution.” However, if you turned age 59 ½ during 2014, you will receive two 1099 statements, one for each Distribution Code.
 
Why did I receive only one 1099-R statement, when in the past I received multiple statements?
Last year, Members received a separate 1099-R statement for each “payment stream” (a “payment stream” is money paid to a Member, such as a monthly service retirement, DROP annuity, Domestic Relations Order (DRO), continuance, or one-time rollover). This year, all “payment streams” with the same IRS Distribution Code were combined to a single statement.
 
Why is Box 2b checked indicating “Taxable Amount Not Determined”?
This box should only be checked if the Member entered DROP or retired before 2003.
Prior to 2003, SDCERS’ pension tracking system did not track if Member pension contributions were made on a pre-tax or post-tax basis. This information is necessary to determine the taxability of a member’s retirement benefit payments. Because of this pre-2003 pension tracking system limitation, SDCERS cannot determine the taxability of these payments.  When Members retired before 2003, SDCERS provided a manually prepared Retirement Certificate.  This certificate explained the total pre-tax and post-tax contributions SDCERS received from the Member (developed manually, as noted above, since the pre/post tax breakout information did not exist in SDCERS computer system). This certificate should be provided to the Member’s tax accountant to determine the non-taxable portion of the benefit using applicable IRS amortization tax tables. SDCERS is not able to provide this tax return guidance.
 
I live outside of California, so why does Box 13 say California?  My accountant says this will cause a problem.
Box 13 represents SDCERS’ state of residence, not the 1099-R recipient’s state of residence. Box 13 will say California whether or not the payee lives in California because it is SDCERS’ state/tax number.
 
1099R – Defined
 
Box 1 - Gross Distribution
This box represents the total amount of the distribution in 2014 before income tax or other deductions were withheld.
 
Box 2a – Taxable Amount
This box represents the amount of the distribution that is taxable. If this box is blank, that means that SDCERS is not able to determine how much of the distribution is taxable. When this box is blank, Box 2b ‘Taxable Amount Not Determined’ is checked. See notes below for Box 2b.
 
Box 2b – Taxable Amount Not Determined
If Box 2b is checked, that means that SDCERS is not able to determine how much of their distribution is taxable.
 
Box 4 – Federal Income Tax Withheld
This box represents the total federal tax withheld and remitted to the IRS during 2014.
 
Box 5 - Employee Contributions/Designated Roth Contributions or Insurance Premiums
This is the amount of post-tax payments returned to the payee during the year. This means that the Member made post-tax contributions to their account while they were still an active employee. Each month, a small portion of this is included in the Member’s retirement check. This money was already taxed before it was contributed to SDCERS so it is not taxed again when it is distributed.
 
Box 7 – Distribution Codes
Below are the most common distribution codes used by SDCERS:
1 Early Distribution, no known exception (10% penalty applies)
2 Early Distribution, exception applies (No penalty)
3 Disability
4 Death
7 Normal distribution
E Distribution under employee plans compliance resolution program
G Direct rollover
 
Box 12 – State tax withheld
This box represents the total state tax withheld in 2014 that was remitted to the state of California. We do not withhold state taxes for any other state. If you are a Member living outside of California, state taxes are not required to be withheld. If taxes were withheld, a Member can request to not withhold state taxes by submitting a new Tax Withholding form.
 
Box 13 – State/ Payer’s state number
This box contains the code for the Payer’s (SDCERS) state of residence (California) and state tax ID number.  This does not pertain to the state of residence of the individual. This will be filled in whether or not there were any state tax withholdings.
 
 
 
 




Document Under Categories: 1099R

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