WHAT IS IRS Publication 575

IRS Publication 575 is a document published by the Internal Revenue Service, IRS, that provides information on how to treat distributions from pensions and annuities, and how to report income from these distributions on a tax return. It also outlines how to roll distributions into another retirement plan.

BREAKING DOWN IRS Publication 575

IRS Publication 575 is updated for each tax year. It discusses the tax treatment of distributions from pension and annuity plans and also shows how to report the income on a federal income tax return. How these distributions are taxed depends on whether they are periodic payments, or amounts received as an annuity that are paid at regular intervals over several years, or, nonperiodic payments, which are amounts not received as an annuity. It covers the following topics:

  • How to figure the tax-free part of periodic payments under a pension or annuity plan, including using a worksheet for payments under a qualified plan.
  • How to figure the tax-free part of nonperiodic payments from qualified and nonqualified plans and how to use the optional methods to figure the tax on lump-sum distributions from pension, stock bonus, and profit-sharing plans.
  • How to roll over certain distributions from a retirement plan into another retirement plan or IRA.
  • How to report disability payments, and how beneficiaries and survivors of employees and retirees must report benefits paid to them.
  • How to report railroad retirement benefits.
  • When additional taxes on certain distributions may apply including the tax on early distributions and the tax on excess accumulation.

Publication 575 does not cover the tax treatment of funds from nonqualified plans, such as commercial annuities. Information on this treatment is available in IRS Publication 939, General Rule for Pensions and Annuities. In addition, this publication does not cover benefits from retired government employees or their beneficiaries, which are covered in IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits.

Terms referenced in IRS Publication 575

A pension is generally a series of definitely determinable payments made after an employee retires from work. Pension payments are made regularly and are based on such factors as years of service and prior compensation. An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. They can be either fixed where the holder receives a definite amount, or variable, which is not fixed. An employee can buy the contract alone or with the help of their employer. A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries and that meets Internal Revenue Code requirements. It qualifies for special tax benefits, such as tax deferral for employer contributions and capital gain treatment or the 10-year tax option for lump-sum distributions, if participants qualify.