If you became a member of LABF after 1981, your contributions have been exempt from taxation. Therefore, when you retire, your full monthly annuity will be subject to taxation.
If you became a member of LABF before 1982 you may have already paid income tax on some of your pension contributions. This investment is called your employee contributions. You do not have to pay income tax on those contributions again. Based on your age at retirement, the IRS rules permit you to spread these employee contributions, tax-free, over so many months. The monthly amount of your annuity that will be excluded from income tax is calculated at the time of retirement. You will receive a letter from LABF with the pertinent information once your annuity benefit has been approved.
Since the income tax law relating to taxation of annuities is somewhat complicated, we suggest that you consult your Federal Income Tax adviser or your local Internal Revenue Service office if you have difficulty in preparing your income tax return.
1099-R Tax Forms
Once you start receiving annuity benefits from LABF, you will also start receiving annual 1099-R tax forms. Your annual 1099-R will show the total distribution for that year, as well as a breakdown of the taxable amount and the employee contributions.
Withholding Federal Income Tax from Your Monthly Annuity
A W-4P is the IRS withholding Certificate for Pension or Annuity Payments. If you would like to change the amount of Federal withholding from your monthly annuity, you can complete a W-4P and submit it to LABF. Please see IRS Form W-4P for the latest IRS form available.
You can also complete the Federal Tax Election section on the front of your monthly earnings statement. Please be sure to complete all the required fields, including your signature.