When you start receiving a benefit payment from your WRS account, you will most likely owe state and federal income taxes on all or a portion of that amount. You will receive an income tax form from ETF for each year that you receive a distribution of funds from your WRS account.
If you are a U.S. Citizen or a resident alien, ETF will send you a 1099-R form by January 31 each year. You do not need to request this information, it is sent automatically and provides the information you will need to complete your tax return. If you do not receive a 1099-R by February, contact ETF to send another one. If you find incorrect information on your 1099-R, contact ETF as soon as possible.
If you have multiple WRS annuity accounts (for example, you receive a monthly payment from your own WRS account and as a beneficiary of another account), you will receive a separate 1099-R for each account. It is important that you file copies of all your 1099-R forms with your annual tax returns, if required by the taxing authority.
You will get multiple copies of your 1099-R form(s) in the same envelope:
- Copy B – To be used in preparing your federal income tax return. Send this copy to the IRS with your tax return if there is an amount shown in Box 4 (Income Taxes Withheld).
- Copy C – This copy is for your records. Retain and keep in a safe place.
- Copy 2 – To be used in preparing your state, city or local income tax return, when needed.
Reading Your 1099-R
The following information is intended to help you understand your 1099-R. If you need more information, contact the IRS or your professional tax advisor.
- Box 1: The gross distribution is the total amount you received from your WRS account. This amount may have been received as monthly payments, a lump-sum payment or as a rollover .
- Box 2a: The taxable amount on the distribution from your WRS account.
- Box 5: Shows the non-taxable portion of your monthly payment. Most employee contributions are made on a “pre-tax” basis, making that portion of your monthly payment subject to taxes upon disbursement. However, some types of employee contributions can be made on an “after-tax” basis. The after-tax portion of your payment is considered your “Investment in Contract ” and is not subject to additional taxes. Recovery of your after-tax contributions is spread out across your expected lifetime of payments. The amount in Box 5 is your annual recovery of after-tax contributions and equals the difference between Box 1 and Box 2a.
- Box 7: A distribution code identifies the type of distribution you received. For code descriptions, please see the information on the back of your 1099-R.
Rollover (Code G)
Distribution code G on your 1099-R indicates that your WRS benefit was rolled over to another qualified plan. In most cases, your 1099-R will show $0.00 as the taxable amount in Box 2a, unless you rolled over your distribution to a Roth IRA. The amount you rolled over will not be subject to taxes until you start taking money from your IRA/qualified plan. However, rollovers to Roth IRAs are subject to income taxes in the year the rollover is made. Please talk to your tax advisor or the IRS if you have questions about the income tax implications for rollovers to a Roth IRA.
Multiple 1099-R Forms
Each distribution code requires a separate 1099-R form. If you received more than one distribution type, you will receive more than one 1099-R. For example, if you turned age 59½ during the calendar year , you would receive one 1099-R reporting any distributions taken before age 59½ (distribution code 2) and another 1099-R reporting distributions taken after age 59½ (distribution code 7).
If you are not a U.S. Citizen, and you do not reside in the United States, ETF will send you a 1042-S by March 15 each year instead of a 1099-R. You do not need to request this information, it is sent automatically.
The 1042-S reports the income that you received from your WRS account.
This form will be postmarked by March 15. If you do not receive the form by March 31, contact ETF to send another one. Please allow one month for international mail delivery.
If you find incorrect information on your 1042-S, please contact ETF as soon as possible.