DISCLAIMER

Tax or professional advice contained in or accompanying this document, unless otherwise specifically stated, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in or accompanying this document. In addition, unless otherwise specifically stated, any advice provided shall not be deemed a formal tax opinion upon which the addressee can rely.

Since tax time is upon us, I have received numerous inquiries concerning how to correctly report Length of Service Awards Program (LOSAP) payments on Federal and New York State Tax Forms. LOSAP is exempt from New York State Income Tax starting with the 2014 New York State Income Tax Returns.

For LOSAP payments to be exempt from New York State Income Tax the following rules apply:

1. Taxpayer must be at least 59 ½.

2. Payments must be made on a periodic basis (not a lump sum).

For the State of New York the payments are to be listed on form IT-225 New York State Modifications, Page 2, Schedule B New York State Subtractions, Part 1 Individuals, Line 10, in the number column enter “130”, and enter the “amount” in column A – Total Amount. The total of form IT-225 Subtractions line 18, is then entered on form IT-201 New York State Resident Income Tax Return, Page 2, Line 31, which subtracts the LOSAP payment from your New York State Taxes.

For your Federal Taxes there is not one strict reporting method, LOSAP vendors have been correctly reporting the payments three different ways depending on how the plan was structured:

1. Form 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing

Plans, IRAs, Insurance Contracts, etc.

2. Form 1099-Miscellaneous with the amount reported in Box 3 Other Income.

3. Form W-2 with amounts reported in Box 1 Wages and Box 11 Nonqualified plans.

They are all reported differently on your Federal Form 1040, but the tax result is all the same. They are entered on Federal form 1040 as follows:

1. Form 1099-R is entered on Form 1040 on Line 16 Pension and Annuities.

2. Form 1099-Misc. box 3 in entered on Form 1040 on Line 21 Other Income.

3. Form W-2 with a box 11 amount is entered on Form 1040 on Line 7 Wages.

Hopefully this will clear up any reporting questions that you may have had. Please see your plan administrators and/or tax professionals for further guidance.