The Simplified Method Worksheet and when to use it

If Form 1099-R does not show the taxable amount in Box 2a, you may need to use the General Rule explained in Publication 575 and Publication 939 to figure the taxable portion to enter on the tax return. If the annuity starting date was after July 1, 1986, the taxpayer may be required to figure the taxable part of their distribution using the Simplified Method.

The annuity starting date is the later of

• the first day of the first period for which the taxpayer received a payment.
• the date that the plan's obligations became fixed.

Do I have to use the Simplified method? 

The taxpayer must use the Simplified Method if

• the annuity starting date was after July 1, 1986, and this method was used last year to figure the taxable portion;
• the annuity starting date was after November 18, 1996, and BOTH of the following apply:
  1. The taxpayer received pension or annuity payments from any of the following plans:
  • A qualified employee plan, or
  • A qualified employee annuity, or
  • A tax-sheltered annuity plan (403(b) plan)
  2. On their annuity starting date, at least one of the following is true:
  • They were under age 75, or
  • They were entitled to less than 5 years of guaranteed payments

Are there restrictions on when the Simplified Method cannot be used?

The taxpayer cannot use the Simplified Method if

• the pension or annuity is a nonqualified plan, or
• they do not meet the conditions described above.

How do I access the Simplified Method Worksheet?

To access the Simplified General Rule Worksheet, from the Main Menu of the Tax Return (Form 1040) select:

• Federal Section
• Income
• 1099-R, RRB-1099, RRB-1099-R, SSA-1099
• Add or Edit a 1099-R 
• Enter your 1099-R information
• Select "Click here for options" under Box 2a entry
• Simplified Method Worksheet

This is a guide on entering the Simplified General Rule Worksheet into the TaxSlayer program. This is not intended as tax advice.