Taxes & Your Benefit
Generally, your retirement benefit is considered taxable for both federal and state income tax purposes. However, in some cases, all or a portion of your benefit may be excluded from your gross income for federal and/or state income taxes.
You are required to report your KCPERS income for income taxes in the state where you have your permanent place of residency. Therefore, if you do not live in Missouri permanently, you would not be responsible for Missouri income taxes. You will be required, however, to report your KCPERS income for federal income tax purposes regardless of where you live. Visit your state website to download a copy of the applicable state income tax withholding form.
Each individual receiving a taxable benefit from KCPERS receives an annual 1099-R form. This form is used to report distributions from KCPERS, a Public Pension plan, to its members.
The form, like a W-2, will display several pieces of information such as gross amount paid to you by the retirement plan, the taxable amount distributed by the retirement plan, federal and state taxes withheld, etc., for reporting personal annual taxes to the IRS and state government.
However, this form DOES NOT contain deductions made for health, dental, vision or life insurance. Your December earnings statement will reflect the gross annuity, deductions, and net payment amount for the year. Keep this document in your records for future reference. If you need information on your total deductions and did not retain a copy of your December statement, please contact our office at (816) 482-8138 to have a "Year-to-Date" statement provided to you for the calendar year you are reporting.
Your 1099-R Tax Form
KCPERS sends 1099-R tax forms every year in late January. If you don't receive your 1099-R by the second week in February or if you moved or have a new address, you must complete a Change of Address Form as soon as possible. Download the form and mail or fax the form to the KCPERS office.
Understanding Your 1099 Tax Forms
- Box 1: Reports the gross annuity paid to you
- Box 2a: Reports the taxable amount paid
- Box 4: Reports the total federal tax withheld
- Box 5: Reports the non-taxable* amount paid to you during the reporting year
*Your non-taxable amount paid during that period is determined by any post-tax contributions you made to KCPERS prior to your retirement. Box 1 - Box 2a = Box 5.
Tax Withholding
The Internal Revenue Service revises the tax tables annually, which could affect the amount of tax withheld from your benefit check. Your tax advisor can help you decide whether to adjust your withholding amounts for the year.
You are entitled to change the federal or state tax withholding on your annuity at any time. To download the Federal or Missouri state withholding forms, visit the Forms page or call (816) 482-8138 to request a form by mail. You can visit your state website to download withholding forms for other states.
For those individuals that KCPERS can determine the taxable amount, the 1099-R form will include an amount in Box 5. The heading of Box 5 states, "Employee contributions/Designated Roth contrib. or insurance premiums." For KCPERS purposes, Box 5 represents the member's investment in the retirement system (after-tax contributions) recovered tax free for the calendar year.
The amount reported in Box 5 was determined using the Simplified Method as outlined in IRS publication 575. The simplified method typically spreads the recovery of the member's investment over a 20 to 30 year period. If the member dies prior to full recovery, the remaining balance is passed to the member's surviving spouse, or as tax deduction to the member's estate.
Further stated, Box 5 is the amount of non-taxable pension you received in the calendar year due to previously paying tax on a portion of your pension contributions while you were employed. Box 5 is provided for informational purpose only and is already reflected in the Federal (Box 2a) and State (Box 14) Taxable Amount figures - no additional steps need to be taken in regard to your personal tax return.
Missouri Public Pension Exemptions; Are you eligible?
As the recipient of a public pension, you may qualify for the Missouri public pension exemption. This exemption allows you to exclude a portion of your pension and/or Social Security Income from your gross taxable income for your Missouri taxes.
The exemption will be calculated as the amount of your taxable pension, limited to the maximum exemption amount for each taxpayer, and then reduced by the amount of your nontaxable social security benefit. You may qualify for the full or partial exemption.
To see if you qualify for any or all of the exemption, you will need to file Form MO-1040 or MO-1040P. You will need to complete the worksheet in Part 3 of Form MO-A to file with your MO-1040.
KCPERS recommends that you contact the Missouri Department of Revenue or a qualified tax professional for information or questions regarding your eligibility to claim the public pension exemption.