Tax Information

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. It is a member’s responsibility to declare the proper amount of taxable income on income tax returns.

1099-R

TRS mails 1099-R tax forms at the end of every January.

The tax statement contains confidential information and only can be mailed to the address of the member that is currently on record with TRS. For TRS to send the form to a different address, the member, beneficiary or power of attorney must submit a written, signed request to TRS. The written, signed request may be mailed to TRS or faxed to 502-573-0254 and should specify if the address change is permanent. Duplicates are available using Pathway (https://mss.trs.ky.gov), which provides members online access to account information, or by calling 800-618-1687. The TRS information center staff will verify your correct name and address for mailing the duplicate form and for the permanent record file.
 

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

Many TRS members do not owe Kentucky state taxes on TRS benefits. TRS strongly recommends you seek the advice of a qualified tax preparer for any specific questions concerning Kentucky income taxes on your pension. You may want to take a printout of this page to your tax preparer.

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. 

Here’s how:

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.

Tax forms may be obtained through the Kentucky Department of Revenue. Make sure to look for Schedule M (adjusted gross income modifications) and Schedule P (pension income exclusion). Also, the following telephone numbers can provide more information.

Federal taxes

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.

For other disbursements, such as a refund or taking a payment of a supplemental benefit after retirement by TRS 4 members, the IRS is expected to create a W-4R that can be completed as soon as Jan. 1, 2022. This instructs TRS how to withhold additional amounts above what is required from your distribution for federal taxes. (This will be updated based on further guidance from the IRS.)

Withholding

Withholding is optional, but failure to properly withhold for taxes could result in penalties. TRS withholds for Kentucky taxes but does not withhold for other states or local taxing jurisdictions. (Information about the Kentucky state tax rate is available from the Department of Revenue.) Withholding elections may be made at retirement or the time of a disbursement using the appropriate application or the withholding form available elsewhere on the TRS website. The TRS form has separate sections for federal and Kentucky state withholding that can be completed as desired. For retirees, withholding elections can be changed at any time.

Need help?

  • 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
  • KPPA: 502-696-8800, toll free at 800-928-4646
  • Kentucky Revenue Cabinet: 502-564-4581
  • IRS: 800-829-1040