 Income tax 2021-2022 tax software pensions and annuities. Get ready to get refunds to the max. Dive in to Income Tax 2021-2022. Here we are in our LASERT tax software. You don't need access to it or any tax software. However, you might want to have access to the Form 1040, which you can find on the IRS website, irs.gov, irs.gov. Our starting scenario, the single-filer Adam Smith living in Beverly Hills 90210 100,000 at the Income Standard deduction for the single-filer 12,550 for the 87,450 taxable income, which we can mirror in our accounting equation in Excel, 100,000 the 12,550 standard deduction. We've got the 87,450 taxable income. We then depend on the software to get us the tax calculation at, in this case, the 1515. So that's going to be our starting point. Going back then to page one of the tax return, we're focused this time on the pension and annuities line, item 5A and 5B. You will often be receiving or have some kind of form such as this, the 1099R. Similar kind of scenario we had with the IRA type of situation where we have the gross distributions and the taxable distributions. When you're thinking about the 1099R, you're typically thinking about some kind of retirement plan, the typical scenario being that during the working years you're putting money in, getting the benefit, and that's not what we're looking at at this point with this 1099R because the 1099R means that it might have to be included at income. So usually that's after retirement age when you would be receiving the money at that point in time and possibly need to record it in income. The first two boxes are going to be the primary boxes then that you would think would be applicable, the gross distributions, and 2A, the taxable amount of those distributions. We also have the taxable amount not determined or total distributions in the event that, if there's a check that it's not determined, then you might have to look and that's an indicating that you would need to look into it further in terms of the taxable amount. Capital gain, federal income tax withheld, note that if you're talking about someone that is retired no longer working, then a lot of their income that they're living off of might be coming out of a retirement accounts and therefore you might have federal withholdings coming out here as well. So just remember if you're working with someone in their working years, it's likely that their withholdings are coming out of the W-2 after the working years, then they're going to be paying in some other way possibly with the withholdings on the 1099 here. And then we've got the employee contributions, net unearned appreciation in employer securities, distributions, and then down here we've got the iris step and simple, which we would check off if those were applied or it would be checked off if those would be applied. Your percentage of total distribution, total employee contributions, and so on. So we're mainly focused up on these two boxes up top, the general scenarios being that, for example, if they're after the retirement age or the age that they can receive the distributions, then you would expect that you would have the same amount in box one and in box two and possibly a code down here in box number seven that would say it was a normal distribution which I believe is code number seven. That would be the normal scenario. However, if it was a rollover, they rolled it over into some other kind of retirement account then you might have a gross distribution up top and then the taxable amount at zero and then down here it's going to indicate why, indicating that it's a rollover with the code down here or you have the scenario where you have the gross distribution, the taxable amount and then on the code section it's an early withdrawal with no exception, for example. That's the common example that you don't want to see where you could be subject to the penalty. Similar kind of scenario with the IRIS. So if I go back on over and we say, okay, let's go back to the first tab and let's say it's going to be some kind of income and we're going to call it pension and annuity. So I'm going to say this is going to be pension and annuity. I'll just call it one here and we're going to say the distribution codes. Here's all the codes. Now, if there's something in box seven, this would be coming generally from box seven on our form that you don't know what it is. Go to the instructions and take a look at it. What that code is telling you and go from that point. If the instructions aren't given to you by the client in the form, then you can go to the IRIS website and look at the instructions for that particular form. So we're going to say it's seven, normal distribution and then we're going to say that the gross distribution, let's go with our 1,000 again, with the 1,000, it's still going to be taxable. That's the general rule because when you pull it out it's going to be taxable because you got the benefit when you put it in. So typically if that were the case, you would expect them to be over the age limit where they can basically pull it out as a normal distribution without a problem. So let's jump back on over here. Notice we have a similar kind of scenario we saw with the IRA, but now it's going to be over here in 5A. So pensions and annuity, I'm sorry, it's in 5B, the taxable amount is the 1,000. So we've got instead of being up top in line four is what I was trying to point out there. So we got the 100,000 and the 1,000 that brings us to the 101. It would be included in income. If I was to mirror that over here we're going to say the income line item. We have the distributions from an IRA. I'm basically going to expand the definition here to pull in the pension as well for the 1099R and that's going to be our 1,000 bringing us up to the 101, pulling up to the first formula page or worksheet. So there we have it. We're still at the 12,550. That gives us the taxable income of the 88,450. So if I go back on over to the 10,40, now we're in the 10,40 SR, but I'm going to go and notice 10,40 SR just to note if I go to page four we're going to have an adjustment to the standard deduction because now they're over the age. So we're at the 15, I'm sorry, what the 14,250. I can mirror that in my Excel worksheet by saying I'm just going to be the standard deduction. Plus, we're going to have this one item for the single for being over the age requirement to get us to the 14,250. Let's go back on over. I like to look at the 10,40 so I can see the normal layout that we're used to here. So there's the 14,250 taxable income at the 86,750 now matching here 86,750. Let's then go to page two where we have the tax would be at the 14,847. So we'd say okay there's the 14,847 14,847 on the tax. So there is that scenario. I'm going to go back then to page one. Now just note you might have some withholdings on that just to imagine there was a withholding down here in line four federal income tax withheld. It's just similar to a W2 type of situation in that event and typically you'd be putting that into the same data input screen. So federal income tax withheld. Let's say it was $50 withheld or something like that. I'm going to go back to the form then. And so now we've got on page two we've got our withholding that took place in a similar way as you'd see with a W2. Here's your W2 withholding the 1099. If I was to see that over in our forms then I would have the payments. I'm going to have the W2 or other withholdings. I'll add that into this line items. See if I spelled it properly spelled it properly and we'll say 50 here. So then if I go back to my worksheet and go back on over we have the tax at the 14 847 and then we have the other taxes. I shouldn't have any other taxes here. Let's get rid of the other taxes. This would be the penalty which we'll take a look at later. So I've removed the other taxes. So that's then going to give us the 50 down here. So the amount would be the 14 797. So we're going to go back on over to page two of the 1040. Page two and then they have a penalty of the 266 the 266. So if I was to add the 266 we'd have then the 15063 which is what they have here. So and we'll talk more about we could look at the penalties. That's a late payment penalty because it was here. So in any case that's with the withholdings that you can have a withholding condition. Now you can imagine a situation where they need the money and they're saying I'd like to pull it out and I'd like some reason to be able to pull it out early because I need the money at this point in time. Well they're going to be subject to the penalty in that case. So that you could try to see if they qualify for one of these items down below to avoid the 10% penalty because that's what they want to avoid. If they do that if they qualify for something that avoids the penalty and they're able to take the money out they're still going to have to pay taxes on it so they're only avoiding basically the penalty if that were the case. So in that instance you would go to there would be some code section that would say it's not going to be a normal distribution there's an exception. Early distribution some kind of exception applies then if I go back to the forums notice that the exception doesn't stop the income from still being reported because we're still going to have the two boxes we're imagining here to be a taxable amount. It would still be saying it would still be saying gross distribution is the same as the taxable amount but we can imagine that the code section is going to avoid the penalty by saying you're avoiding the penalty because you had a reason to pull it out and if you have a reason then you don't want to just pull it out you want to talk to your financial advisor to make sure that they get the 1099 filled out right so that the IRS doesn't think that you're going to owe them a 10% penalty based on the 1099 you can see that we don't have that add a tax on page 2. Now the other common distribution is a rollover so that would be something like a G maybe and in that case we're going to say that there would be a gross distribution and not a taxable amount so you might see something like that where you'd have something in box 1 possibly not in 2A here and then the distribution code down here like a G or something in the 7 item so in that case it's a scenario where someone left a job for example and they went to another job and they didn't just pull the money out but instead rolled it over so now you've got the amount in the pension and annuities in 5A on the rollover it's not being included in taxes it's just an informational thing we're back to the 100,000 and the 12,550 so if I go and mirror that over here we could say okay the other income we don't have this amount you might want to make a more detailed worksheet and put the untaxable distribution over here if you wanted to double check that but I'm just going to put the 100,000 that brings us back to the 87,450 and the taxable income 87,450 the tax is now again at the 15,15 so this is going to 150,15 so those are the general scenarios