Retired for several years, the line 3 amount on my annual RRB 1099 R never changes. The explanation on the back of the form explains this is the amount contributed in excess of what would have been paid in social security taxes. Is there a way to reduce my annual tax by utilizing this amount? Thanks in advance for any guidance you can provide.
An number in box 3 of a RRB-1099-R is your after-tax contribution toward your pension and is equivalent to box 9b of a conventional 1099-R. It will reduce your federal tax liability by amortizing this amount over your predicted lifetime using the simplified general rule (which all tax software includes). The annual reduction in taxable income will be around 4% of box 3 every year until you use it up.
California doesn't tax ANY amount on RRB-1099-R; but you have to explicitly account for this on CA form CA. I don't know about other states.
The amount in Box 7 is your gross payment. That gets entered on Line 16a of the 1040. The amount in Box 3 is used to compute how much of Line 16a of the 1040 is taxable (the amount you will put on Line 16b). The amount in Box 3 of the RRB-1099-R is equiavalent to the amount in Box 9b of the
1099-R. You use the Simplified Method as explained in IRS Pub 575 to compute the taxable amount. There is also a simplified method worksheet in the 1040 instructions.If you have been using the amount in Box 7 as your taxable pension, you have been over paying your taxes.
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