Question

Hairy 71, a single taxpayer, began receiving a pension of $3500 per month for life on May 1, 2009. He has after-tax contributions in the plan. His 2022 Form 1099-R is shown below. Box 28 is blank. Which of the following statements is correct?

1) The pension is taxable income for Hairy 71.
2) The pension is not taxable income for Hairy 71.
3) The after-tax contributions are taxable income for Hairy 71.
4) The after-tax contributions are not taxable income for Hairy 71.

Answer 1

Hairy 71's pension is partially taxable; the after-tax contributions portion is not taxable, while the rest of the pension payments are taxable income.

Step-by-step explanation:

The pension received by Hairy 71 is partially taxable. The portion of the pension that represents the after-tax contributions is not taxable because those amounts were already taxed before they were contributed to the pension plan. However, the remainder of the pension payments, which likely consist of earnings on the after-tax contributions and any employer contributions, is considered taxable income. Based on the provided information, the correct statements are: 1) The pension is taxable income for Hairy 71, and 4) The after-tax contributions are not taxable income for Hairy 71.