Updated October 19, 2026. Quick answer: Publication 575 is the IRS guide to how pension and annuity payments are taxed and reported, and the web edition is for 2025 returns. It covers the Simplified Method worksheet for qualified plan annuities, rollovers, and when an additional 10% tax applies before age 59 and a half.
Quick reference
| Item | As the IRS publication states it |
|---|---|
| Mandatory withholding on an eligible rollover distribution paid to you (chapter on rollovers) | 20% |
| Withholding rate on a nonperiodic distribution that is not an eligible rollover distribution (Withholding Tax and Estimated Tax) | 10% |
| Additional tax on most distributions before age 59½ (Tax on Early Distributions) | 10% |
| Simplified Method age condition on the annuity starting date | under age 75 |
| Simplified Method guaranteed payments condition | less than 5 years |
| Insurance premium exclusion for retired public safety officers | $3,000 |
What the publication covers
The introduction says “This publication discusses the tax treatment of distributions you receive from pension and annuity plans and also shows you how to report the income on your federal income tax return.” The IRS cover line reads “For use in preparing 2025 Returns”.
The publication adds that “How these distributions are taxed depends on whether they are periodic payments (amounts received as an annuity) that are paid at regular intervals over several years or nonperiodic payments (amounts not received as an annuity).”
What it leaves to other publications
For IRAs, the source says “Information on the tax treatment of amounts you receive from an IRA is in Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs).”
For Social Security, it says “For information about the tax treatment of these benefits, see Pub. 915, Social Security and Equivalent Railroad Retirement Benefits.”
Parts of the publication in plain words
- General information: definitions of pensions and annuities, types of annuities, variable annuities, Section 457 plans, disability pensions and railroad retirement benefits, including the boxes on Form RRB-1099-R.
- Withholding tax and estimated tax.
- Cost (investment in the contract), and the taxation of periodic payments, split between fully taxable and partly taxable payments.
- The Simplified Method and the General Rule.
- Taxation of nonperiodic payments, loans treated as distributions, transfers of annuity contracts, and lump sum distributions.
- Rollovers, and the special additional taxes, including the tax on early distributions.
Worksheets and tables inside it
- Worksheet A, Simplified Method, and an illustrated version, Worksheet A for Bill Smith
- Table 1 for Line 3 and Table 2 for Line 3, the tables that give the number of expected monthly payments
- Table 1, Comparison of Payment to You Versus Direct Rollover
The matching page on this site is the Simplified Method worksheet.
The figures that matter
On who uses the Simplified Method, the source says “You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions.” One condition is the plan type. The other is that “You are under age 75.” or “You are entitled to less than 5 years of guaranteed payments.”
On how it works, the publication says “Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments.”
On the cost limit, it says “If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost can’t exceed your total cost.”
On withholding, “If an eligible rollover distribution is paid to you, the payer must withhold 20% of it.”
On early distributions, “Most distributions (both periodic and nonperiodic) from qualified retirement plans and nonqualified annuity contracts made to you before you reach age 59½ are subject to an additional tax of 10%.”
Where to go next
Reporting happens on Form 1040 lines 5a and 5b, covered at Form 1040 line 5a and 5b. For rollover withholding see 20 percent withholding on a pension lump sum, and for the early distribution tax see Form 5329 explained.
Where this comes from
The IRS page About Publication 575 opens with “This publication discusses the tax treatment of distributions you receive from pension and annuity plans and also shows you how to report the income on your federal income tax return.” It links the PDF and eBook editions and the earlier revisions of the publication.
This page describes the web edition of Publication 575 (2025), Pension and Annuity Income, as served on irs.gov on October 19, 2026. The IRS can revise a publication after we read it, and the IRS page controls. General information, not tax or legal advice.
Common mistakes
- Assuming the General Rule and the Simplified Method are interchangeable. The source says the General Rule applies to a nonqualified plan and “You can’t use this method if your annuity is paid under a nonqualified plan.”
- Expecting this publication to explain IRA withdrawals. The introduction points those to Pub. 590-B.
- Thinking the 20% on an eligible rollover distribution is optional. The source says “You can’t choose not to have tax withheld from an eligible rollover distribution.”
- Treating the tax free part as something that is refigured each year. The source says “This tax-free part of the payment is figured when your annuity starts and remains the same each year even if the amount of the payment changes.”
Related: IRS publications by number, Simplified Method worksheet, Form 1040 line 5a and 5b, 20 percent withholding on a pension lump sum, Is a pension annuity eligible for rollover, Form 5329 explained, and Railroad retirement explained.
Sources
- IRS, Publication 575 (2025), Pension and Annuity Income (irs.gov): https://www.irs.gov/publications/p575
- IRS, About Publication 575 (irs.gov): https://www.irs.gov/forms-pubs/about-publication-575
Read from the IRS pages linked above on October 19, 2026. General information, not tax or legal advice. The IRS publication and the instructions for your own form control, and your own facts decide the outcome.