Updated November 5, 2026. Quick answer: Worksheet A in Publication 721 (2025) is the IRS Simplified Method for the tax-free part of a CSRS or FERS annuity. It divides your cost in the plan by a number of months from Table 1 or Table 2, multiplies by the months you were paid this year, stops at your remaining cost, and subtracts that from the payments to give the taxable amount for the year.
When Worksheet A applies
The publication says “Use Worksheet A (near the end of this publication) to figure your taxable annuity.” It adds “Be sure to keep the completed worksheet.” The Form 1040 instructions have their own sheet, which this publication allows: “Instead of Worksheet A, you can generally use the Simplified Method Worksheet in the Instructions for Form 1040 to figure your taxable annuity.” There is one exception: “However, you must use Worksheet A and Worksheet B in this publication if you chose the alternative annuity option”. The Form 1040 version is on the Simplified Method Worksheet page, the alternative annuity sheet is Worksheet B, and the publication overview is Publication 721.
Lines 1 to 11
| Line | What it asks |
|---|---|
| 1 | “Enter the total pension or annuity payments received this year.” “Also, add this amount to the total for Form 1040, 1040-SR, or 1040-NR, line 5a” |
| 2 | “Enter your cost in the plan at the annuity starting date, plus any death benefit exclusion.” |
| 3 | “Enter the appropriate number from Table 1 below.” “But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below” |
| 4 | “Divide line 2 by the number on line 3” |
| 5 | “Multiply line 4 by the number of months for which this year’s payments were made.” |
| 6 | “Enter any amounts previously recovered tax free in years after 1986.” “This is the amount shown on line 10 of your worksheet for last year” |
| 7 | “Subtract line 6 from line 2” |
| 8 | “Enter the smaller of line 5 or line 7” |
| 9 | “Taxable amount for year. Subtract line 8 from line 1. Enter the result, but not less than zero.” “Also, add this amount to the total for Form 1040 or 1040-SR, line 5b.” |
| 10 | “Add lines 6 and 8. This is the amount you have recovered tax free through 2025.” |
| 11 | “Balance of cost to be recovered. Subtract line 10 from line 2.” |
Two routing notes sit on the sheet. After line 5: “If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11.” Before line 3, for a later year: “If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year’s worksheet on line 4 below”.
Which number goes on line 3
The publication explains “The number you enter on line 3 is the appropriate number from Table 1 or 2 representing approximate life expectancies in months.” For an annuity starting after 1997 it says “Table 1 for an annuity without a survivor benefit, or” “Table 2 for an annuity with a survivor benefit.” “If your annuity starting date is before 1998, use Table 1.”
Table 1 as printed at the bottom of the worksheet, by your age on the annuity starting date:
| Your age on the annuity starting date | Starting date before November 19, 1996: enter on line 3 | Starting date after November 18, 1996: enter on line 3 |
|---|---|---|
| 55 or under | 300 | 360 |
| 56 to 60 | 260 | 310 |
| 61 to 65 | 240 | 260 |
| 66 to 70 | 170 | 210 |
| 71 or over | 120 | 160 |
Table 2, used for the combined ages of the annuitants on the annuity starting date:
| Combined ages on the annuity starting date | Enter on line 3 |
|---|---|
| 110 or under | 410 |
| 111 to 120 | 360 |
| 121 to 130 | 310 |
| 131 to 140 | 260 |
| 141 or over | 210 |
The IRS example: Bill Smith
The publication’s example is “Bill’s monthly annuity benefit is $1,000.” “He had contributed $31,000 to his retirement plan and had received no distributions before his annuity starting date.” His annuity starting date was April 1, 2025, he was 65 and his wife Kathy 57, so the combined age is 122 and Table 2 gives 310. Recomputed line by line:
| Line | Entry | Amount |
|---|---|---|
| 1 | Total annuity payments received in 2025 (eight monthly payments of $1,000) | $8,000 |
| 2 | Cost in the plan | $31,000 |
| 3 | Table 2, combined ages 122 (65 and 57) | 310 |
| 4 | Line 2 divided by line 3 (computed) | $100 |
| 5 | Line 4 times 8 months (computed) | $800 |
| 6 | Recovered tax free in earlier years | 0 |
| 7 | Line 2 minus line 6 (computed) | $31,000 |
| 8 | Smaller of line 5 or line 7 (computed) | $800 |
| 9 | Taxable amount: line 1 minus line 8 (computed) | $7,200 |
| 10 | Lines 6 and 8 added (computed) | $800 |
| 11 | Line 2 minus line 10 (computed) | $30,200 |
The publication prints the same results: “Bill’s tax-free monthly amount is $100.” Line 9 is $7,200 and line 11 is $30,200.
The IRS example: David Brown, after Worksheet B
David chose the alternative annuity option, so line 2 is his net cost from Worksheet B. The publication says “David received 10 annuity payments in 2025 of $1,200 each.” The lines that matter:
| Line | Entry | Amount |
|---|---|---|
| 1 | Total annuity payments received in 2025 (ten payments of $1,200) | $12,000 |
| 2 | Net cost from Worksheet B, line 5 | $24,800 |
| 3 | Table 1, age 55 or under, annuity starting date after November 18, 1996 | 360 |
| 4 | Line 2 divided by line 3, as the publication prints it (computed) | $68.89 |
| 5 | Line 4 times 10 months, as printed (computed) | $688.90 |
| 8 | Smaller of line 5 or line 7 (computed) | $688.90 |
| 9 | Taxable amount: line 1 minus line 8 (computed) | $11,311.10 |
| 11 | Line 2 minus line 10 (computed) | $24,111.10 |
The publication rounds line 4 to the cent before it multiplies, so line 5 prints $688.90 rather than $688.89, and line 9 prints $11,311.10. Follow that order if you check a figure against the printed example.
Example with invented numbers
Illustration, not an IRS example. This shows the year the cost runs out. Every result is computed from invented inputs.
| Line | Entry | Amount |
|---|---|---|
| 1 | Total annuity payments received in 2025 (invented: 12 payments of $1,500) | $18,000 |
| 2 | Cost in the plan (invented input for the computed lines below) | $26,000 |
| 3 | Table 1, age 61 to 65, annuity starting date after November 18, 1996 | 260 |
| 4 | Line 2 divided by line 3 (computed) | $100 |
| 5 | Line 4 times 12 months (computed) | $1,200 |
| 6 | Recovered tax free in earlier years (invented, the line 10 figure from last year) | $24,900 |
| 7 | Line 2 minus line 6 (computed) | $1,100 |
| 8 | Smaller of line 5 or line 7 (computed) | $1,100 |
| 9 | Taxable amount: line 1 minus line 8 (computed) | $16,900 |
| 10 | Lines 6 and 8 added (computed) | $26,000 |
| 11 | Line 2 minus line 10 (computed) | $0 |
Line 5 is $1,200, but only $1,100 of cost is left, so line 8 is the smaller $1,100. Line 11 is $0, which is the zero the sheet warns about: “If zero, you will not have to complete this worksheet next year.”
Edition
This page reads Publication 721 (2025), Tax Guide to U.S. Civil Service Retirement Benefits, the file irs.gov served on 2026-11-05). Line numbers and letters belong to that edition, so check the label printed on the worksheet in your own copy before you follow a line reference.
Common mistakes
- Using Table 1 for an annuity with a survivor benefit that started after 1997. The sheet sends that case to Table 2, with the combined ages.
- Rounding line 4 differently from the publication’s example. The printed David Brown figures use a line 4 rounded to the cent.
- Entering last year’s line 11 on line 6. Line 6 is last year’s line 10, the amount already recovered.
- Skipping Worksheet B when you took the alternative annuity option with an annuity starting date after November 18, 1996. Line 2 is then the net cost from Worksheet B, line 5. For an earlier starting date the publication does not reduce line 2 and adds the tax-free part of the lump sum to line 6 instead.
Related: Form 1040 lines 5a and 5b, Publication 721, and FERS retirement calculator.
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Answer againSources
- Publication 721 (2025), Tax Guide to U.S. Civil Service Retirement Benefits: https://www.irs.gov/pub/irs-pdf/p721.pdf
- IRS, About Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits: https://www.irs.gov/forms-pubs/about-publication-721
Read from the IRS documents linked above on November 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.