Tax Lesson 28 - Pension and Annuity Income

1. Look at the Form 1040 you prepared for Greg Rojas. What is the amount on Form 1040, Line 44?

A. $ 35,061.
B. $ 25,360.
C. $ 26,893. 
D. $ 25,960.

2. Look at the Form 1040 you prepared for Greg Rojas. What is the amount on Form 1040, Line 73a?

A. $ 5,640.
B. $ -0-.
C. $ 5,040. 
D. $ 25,360.

3. These payments are a series of definitely determinable payments made to you after you retire from work. These payments are made regularly and are based on certain factors, such as years of service with your employer or your prior compensation.

A. Pension.
B. Annuity.
C. Employee plan.
D. A tax shelter.

4. A series of payments under a contract made at regular intervals over a period of more than one full year. They can be fixed or variable. You can buy the contract alone or with the help of your employer.

A. Pension.
B. Annuity.
C. Employee plan.
D. A tax shelter.

5. An employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries and that meets IRS 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.

A. Pension.
B. Annuity.
C. Qualified Employee plan.
D. A tax shelter.

6. A retirement plan for employees of public schools and certain tax exempt organization. Generally provides retirement benefits by purchasing annuity contracts for its participants.

A. Pension.
B. Annuity.
C. Qualified Employee plan.
D. A tax shelter annuity plan.

7. You received definite amounts at regular intervals for a specified length of time.

A. Fixed-period annuities.
B. Annuities for a single life.
C. Joint and survivor annuities.
D. Variable annuities.

8. You receive definite amounts at regular intervals for life and the payments end at death.

A. Fixed-period annuities.
B. Annuities for a single life.
C. Joint and survivor annuities.
D. Variable annuities.

9. The first annuitant receives a definite amount at regular intervals for life. After he or she dies, a second annuitant receives a definite amount at regular intervals for life. The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant.

A. Fixed-period annuities.
B. Annuities for a single life.
C. Joint and survivor annuities.
D. Variable annuities.

10. You receive payments that may vary in amount for a specified length of time or for life. The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds, cost-of-living indexes, or earnings from a mutual fund.

A. Fixed-period annuities.
B. Annuities for a single life.
C. Joint and survivor annuities.
D. Variable annuities.

11. You receive disability payments because you retired on disability and have not reached minimum retirement age.

A. Fixed-period annuities.
B. Annuities for a single life.
C. Joint and survivor annuities.
D. Disability pensions.

12. If you withdraw funds (other than as an annuity) on or after your annuity starting date

A. A ratable part of the amount withdrawn is tax free.
B. The entire amount withdrawn is generally taxable.
C. The entire amount withdrawn is generally non-taxable.
D. None of the above.

13. If you withdraw funds before your annuity starting date and your annuity is under a qualified retirement plan 

A. A ratable part of the amount withdrawn is tax free.
B. The entire amount withdrawn is generally taxable.
C. The entire amount withdrawn is generally non-taxable.
D. None of the above.

14. If you receive a single-sum distribution from a variable annuity contract because of the death of the owner or annuitant, the distribution is generally

A. Taxable only to the extent it is more than the un-recovered cost of the contract.
B. Non-taxable
C. Taxable if it is at least the cost of the contract.
D. Taxable to the extent that it is less than the un-recovered cost of the contract.

15. You may be able to participate in this compensation plan if you work for a state or local government or for a tax-exempt organization.

A. Section 475 plan.
B. Section 502 plan.
C. Section 457 deferred compensation plan.
D. Section 675 plan.

16. If you retired on disability, you generally must include in income any disability you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you

A. Turn 65 years of age.
B. Reach minimum retirement age.
C. Turn 55 years of age.
D. None of the above.

17. This is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. Which category do these benefits under the Railroad Retirement Act fall into?

A. First Category.
B. Second Category.
C. Third Category.
D. Fourth Category.

18. Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. The total cost of your annuity is $12,000. Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). After that,

A. Your annuity payments qualify to be excluded from taxations.
B. Your annuity payments are fully taxable.
C. Your annuity payments cannot exceed total cost.
D. Your deduction is not subject to the 2%-of adjusted-gross-income limit.

19. You can choose not to have income tax withheld from retirement plan payments unless they are eligible roll over distributions. The payer will ignore your choice not to have tax withheld if

A. You do not give the payer your social security number (in the required manner).
B. The IRS notifies the payer, before the payment is made, that you gave an incorrect social security number.
C. You give the payer an incorrect address.
D. Both A and B above.

20. To choose not to have tax withheld, a U.S. citizen or resident must give the payer a home address in the United States, and have the check delivered to an address in the United States or its possessions. Without that address, the payers must withhold tax. If you do not give the payers a home address in the United States or its possessions, you can choose not to have tax withheld only if you

A. Certify to the payer that you are not a U.S. citizen.
B. Certify to the payer that you are not a U.S. resident alien.
C. Certify to the payer that you are not someone who left the country to avoid paying tax.
D. Any of the above.