Taxation of Nonperiodic Payments

This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. Nonperiodic distributions are also known as amounts not received as an annuity. They include all payments other than periodic payments and corrective distributions.

For example, the following items are treated as nonperiodic distributions.

• Cash withdrawals.

• Distributions of current earnings (dividends) on your investment. However, don’t include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract.

• Certain loans. See Loans Treated as Distributions , later.

• The value of annuity contracts transferred without full and adequate consideration. See Transfers of Annuity Contracts , later.

Corrective distributions of excess plan contributions. Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. To correct an excess, your plan may distribute it to you (along with any income earned on the excess). Although the plan reports the corrective distributions on Form 1099-R, the distribution isn’t treated as a nonperiodic distribution from the plan. It isn’t subject to the allocation rules explained in the following discussion, it

14 Publication 575 (2025)

Worksheet A. Simplified Method Worksheet for Bill Smith

Keep for Your Records

Table 1 for Line 3 Above

AND your annuity starting date was— IF the age at annuity BEFORE November 19, starting date was... 1996, enter on line 3...

IF the age at annuity BEFORE November 19, AFTER November 18, starting date was... 1996, enter on line 3... 1996, enter on line 3...

55 or under 300 360 56–60 260 310 61–65 240 260 66–70 170 210 71 or older 120 160

BEFORE November 19,

Table 2 for Line 3 Above IF the combined ages at annuity starting date were...

THEN enter

annuity starting date were... on line 3...

110 or under 410 111–120 360 121–130 310 131–140 260 141 or older 210

Publication 575 (2025) 15

can’t be rolled over into another plan, and it isn’t subject to the additional tax on early distributions.

If your retirement plan made a corrective distribu-

TIP tion of excess amounts (excess deferrals, excess

contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “E,” or “P” in box 7.

For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compen- sation in Pub. 525.