Income Taxes on PSRS Benefits
PSRS benefits are subject to federal and Missouri income taxes if you live in Missouri. We cannot advise you on whether you should have taxes withheld. However, if your tax withholding is not sufficient to meet your tax liability, you may be subject to penalties and interest in addition to your tax obligation.
How much of your monthly benefit is taxable?
- Most contributions you have made to PSRS are taxable when returned to you in the form of benefits.
- However, if you made contributions to PSRS prior to July 1989, or made payments to reinstate or purchase service using previously taxed dollars, those funds are exempt from additional tax when returned to you in the form of benefits.
- If you have no previously taxed funds in your account, your entire benefit is taxable.
Federal Income Tax
The Internal Revenue Service has recently released an updated Withholding Calculator on www.irs.gov to help taxpayers check their 2018 federal tax withholdings following passage of the Tax Cuts and Jobs Act in December.
The IRS urges taxpayers to use these tools to make sure they have the right amount of tax taken out of their benefit payments.
The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets.
The withholding changes do not affect 2017 tax returns due this April. However, having a completed 2017 tax return can help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018 and avoid issues when they file next year.
The IRS does not allow the withholding of federal taxes in a specified dollar amount. You may, however, choose to withhold an amount based on marital status, the number of allowances you choose and federal tax tables, with an additional dollar amount withheld.
- Tax filing status: married
- Number of exemptions: 0
This results in a withholding amount of $450.
If the desired withholding amount is $500, the member in this example should select a tax status of married, with zero exemptions, and an additional monthly withholding amount of $50.
Members who establish a new withholding amount or change their withholding amount must follow this rule. Those members with previously-designated specified federal tax withholding amounts will continue to have that specified amount withheld until a change is requested.
Please contact your tax advisor or visit www.irs.gov for more information.
Unless you specifically ask us not to do so, we are required to withhold federal income tax from each benefit payment in excess of a specific amount set by the Internal Revenue Service (IRS) each year. If the taxable portion of your benefit is less than that amount, no tax is withheld unless you direct us to do so.
You can use our Federal Tax Withholding and Cost of Living (COLA) Calculator to help plan for your Federal taxes.
State Income Tax
If you live in Missouri, your PSRS benefits are subject to Missouri income tax, with the exception of certain amounts based on your Missouri filing status and adjusted gross income. Missouri income tax is not deducted from your benefit payment unless you direct us to do so. If you move out of state, your Missouri tax withholding automatically stops. If you live in a state other than Missouri, contact the taxing authority of that state for information on state income tax and your PSRS benefit.
Changing Your Tax Withholding
If you need tax advice, contact a tax professional, the IRS at (800) 829-1040 or the Missouri Department of Revenue at (573) 751-3505, or email email@example.com.
IRS Form 1099-R
As a benefit recipient, you receive an IRS Form 1099-R from PSRS each January showing the total benefits paid to you during the previous calendar year, the taxable portion, and the amounts withheld. You will need this form when you prepare your income taxes. To view a history of your past 1099-R forms, log in.
Learn more about IRS form 1099-R