Any information on this page should not considered the only advice needed. Rules and forms likely will differ for retirees who now live outside Kentucky. Retirees may want to confer with a tax preparer or use a computer program for tax form preparation. TRS assumes no liability in providing this general guidance.
TRS mails 1099-R tax forms at the end of every January.
Box 1: Shows total pension benefit before withholding.
Box 2a: Shows taxable portion of benefit. If blank, “Taxable Amount Not Determined” in Box 2b should be marked.
Box 5: Shows the amount member personally contributed to what was received. The Box 5 amount is nontaxable and is not used on personal returns (i.e. IRS Form 1040, Ky. Form 740).
Box 7: Generally, the box 7 value is defaulted to “7” for most benefit types. However, depending on the member’s individual circumstances, the distributions may have been coded differently. Refer to the following distribution codes for more detail:
1 – Early distribution, no known exception
2 – Early distribution, exception applies
3 – Disability
4 – Payment to beneficiary or beneficiaries based on death of active or retired member
7 – Normal distribution
G – Direct rollover
Box 9b: Only used in first year of retirement to show amount of previously taxed contributions.
Kentucky state tax laws
Kentucky law excludes up to $31,110 (a change from $41,110 before 2018) in pension income from state tax (no pension income from service before Jan. 1, 1998 is taxable). Don’t forget to apply the Kentucky pension income exclusion against the amount taxable by the state.
The Kentucky return begins with the federal adjusted gross income, which is on line 5 of Form 740. But that figure can be lowered using the deduction of up to $31,110. On Schedule M, which is where deductions are itemized, line 9 allows up to $31,110 to be deducted. If the amount in box 2a of the 1099-R (or the sum of box 2a amounts, if you have more than one 1099-R) exceeds $31,110, a Schedule P, which reports pension income in detail, will need to be filed. Follow the instructions on the form to determine the amount that goes on Schedule M line 11.
Upon retirement you must report your federal taxable income to the IRS. Under federal tax law, members must pay taxes on their tax-sheltered annuities immediately. If you made contributions prior to August 1982 or made personal payments to the retirement system, TRS will calculate the amount of your contributions upon which you already have paid federal income tax and will report on the 1099-R the amount of your annuity that is still subject to income tax.
When you retire, you must complete a Form W-4P instructing TRS how to withhold federal taxes from your annuity. If you elect to withhold, TRS will withhold federal taxes on the taxable portion of your annuity as calculated using IRS guidelines.
- Tax forms may be obtained through the Kentucky Department of Revenue at http://revenue.ky.gov/Get-Help/Pages/Forms.aspx.
- TRS: 502-848-8500, toll free at 800-618-1687
- KRS: 502-696-8800, toll free at 800-928-4646
- Deferred Compensation: 502-573-7925, toll free at 800-542-2667
- Kentucky Revenue Cabinet: 502-564-4581
- IRS: 800-829-1040