Question

Martin retired in May 2019. His pension is $1,000 per month from a qualified retirement plan to which he contributed $42,000, and to which his employer contributed $12,000. Martin was 67 when the plan payments started. During 2019, he received 8 months of payment for a total of $8,000 from the plan.

a.	Using the simplified method, calculate Martin's taxable income for 2019 from the retirement plan distributions.
b. ​	If Martin's contributions to the plan had been $25,200, instead of $42,000, using the simplified method, how much taxable income would he have to report in 2019 from the plan distributions?

Answer 1

(a) calculation of taxable income:-
Particular	Line	Amount($)
Enter the total amount received this year	1	8000
Enter cost of the plan the annuity starting date	2	42000
Age at annuity starting date 55 and under 360 55-60 310 61-65 260 66-70 210 71 and older 160	3	210
Divide line 2 by line 3	4	200
Multiply line 4 by the number of monthly payment this year. (i.e. 8)	5	1600
Taxable amount ( subtract line 5 from line 1)	6	6400

(b)If martin's contributions to the plan had been $25,200 instead of $42,000, using simplified method, taxable income that will be reported from the plan is:-

Particular	Line	Amount($)
Enter the total amount received this year	1	8000
Enter cost of the plan the annuity starting date	2	25200
Age at annuity starting date 55 and under 360 55-60 310 61-65 260 66-70 210 71 and older 160	3	210
Divide line 2 by line 3	4	120
Multiply line 4 by the number of monthly payment this year. (i.e. 8)	5	960
Taxable amount ( subtract line 5 from line 1)	6	7040