Guide To Your USAA Life Insurance Company Forms 1099-INT and 1099-R For Tax Year 2014

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1 Guide To Your USAA Life Insurance Company Forms 1099-INT and 1099-R For Tax Year 2014 USAA is committed to providing accuracy in reporting tax information related to your life insurance and annuity contracts and help in understanding how it is used. In this guide you will find: a general overview of tax reporting requirements. methods used to determine reported distributions from your contracts with USAA Life Insurance Company. the way the IRS treats distributions from your contracts. the way the IRS treats income on your contracts. a description and explanation of the 1099-R tax form related to your contract. If applicable to your Life Insurance Company contract, you may have received Form 1099-INT and Form 1099-R. The information in this brochure is not legal or tax advice. We recommend that you consult your legal and tax advisors if you need advice regarding your specific situation. If a tax advisor prepares your income tax return, we encourage you to include the instructions for recipient when providing copies of your form(s) Tax Return Assistance on usaa.com From the usaa.com home page, select the Documents tab to sign up to receive your tax forms electronically in the future. In addition to the information in this guide, on usaa.com/taxes you may: view and print your USAA Life Insurance Company form(s) read articles on recent tax law changes. access other tools and information to answer general tax questions and help you complete your tax return. link to IRS publications and forms. 1

2 USAA Number Date Form 1099-INT See TaxHelp at usaa.com Customer Service: FORM 1099-INT CORRECTED (if checked) This form is in a format prescribed by the IRS. It has been modified for clarity by USAA Investment Management Company. PAYER S name, street address, city, state, and ZIP code 1 Interest income OMB No USAA TAX FEDERAL EXEMPT SAVINGS INTERMEDIATE-TERM BANK FUND A C/O 9800 USAA FREDERICKSBURG LIFE INSURANCE ROAD CO. 2 Early withdrawal penalty 9800 SAN ANTONIO, FREDERICKSBURG TX ROAD 14 Form 1099-INT PAYER S federal Federal identification RECIPIENT S identification 3 Interest on U.S. Savings 4 Federal income tax number Bonds and Treas. obligations withheld number RECIPIENT S name 5 Investment expenses MEMBER NAME 6 Foreign tax paid 7 Foreign country or U.S. possession Interest Income Copy B For Recipient This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported. Account number Instructions for Recipient 8 Tax-exempt interest (keep for your records.) 9 Specified private activity bond interest Account number. May show an account or other unique number the payer assigned to distinguish your account. Box 1. Shows taxable interest paid to you during the calendar year by the payer. This does not include interest shown in box 3. Box 2. Shows interest or principal forfeited because of early withdrawal of time savings. You may deduct this amount to figure your adjusted gross income on your income tax return. See the instructions for Form 1040 to see where to take the deduction. Box 3. Shows interest on U.S. Savings Bonds, Treasury bills, Treasury bonds, and Treasury notes. This may or may not be all taxable. See Pub. 550, Investment Income and Expenses. This interest is exempt from state and local income taxes. This interest is not included in box 1. Box 4. Shows backup withholding. Generally, a payer must backup withhold at a 28% rate if you did not furnish your taxpayer identification number (TIN) or you did not furnish the correct TIN to the payer. See Form W-9, Request for Taxpayer Identification Number and Certification, for information on backup withholding. Include this amount on your income tax return as tax withheld. Box 5. Any amount shown is your share of investment expenses of a single-class REMIC. If you file Form 1040, you may deduct these expenses on the Other expenses line of Schedule A (Form 1040) subject to the 2% limit. This amount is included in box 1. Form 1099-INT What is it? Box 6. Shows foreign tax paid. You may be able to claim this tax as a deduction or a credit on your Form See your Form 1040 instructions. Box 8. Shows tax-exempt interest, including exempt-interest dividends from a mutual fund or other regulated investment company, paid to you during the calendar year by the payer. Report this amount on line 8b of Form 1040 or Form 1040A. This amount may be subject to backup withholding. See box 4. Box 9. Shows tax-exempt interest subject to the alternative minimum tax. This amount is included in box 8. See the Instructions for Form 6251, Alternative Minimum Tax Individuals. Nominees. If this form includes amounts belonging to another person(s), you are considered a nominee recipient. Complete a Form 1099-INT for each of the other owners showing the income allocable to each. File Copy A of the form with the IRS. Furnish Copy B to each owner. List yourself as the payer and the other owner(s) as the recipient. File Form(s) 1099-INT with Form 1096, Annual Summary and Transmittal of U. S. Information Returns, with the Internal Revenue Service Center for your area. On Form 1096 list yourself as the filer. A husband or wife is not required to file a nominee return to show amounts owned by the other. We are required to report taxable interest income to the IRS. This form shows the taxable interest earned throughout the year. Who receives it? A Form 1099-INT will be generated for all accounts to which taxable interest was paid; such as interest on accumulated dividends and interest on delayed death benefits. Business owned accounts and accounts with interest totaling less than 10 that have no tax withholdings will not receive a Form 1099-INT. You are required to report all of your interest even though you will not receive a Form 1099-INT. Where is it reported? Your taxable interest is shown in box 1 A, and you report it on line 8a of form 1040 or 1040A. 2

3 Form 1099-R 9800 FREDERICKSBURG ROAD Form 1099-R What is it? The Form 1099-R you receive from USAA Life Insurance Company provides information to you and the IRS regarding distributions from your: IRAs (Traditional, Roth and SEP) 403(b), Tax Sheltered Annuity (TSA) and Optional Retirement Annuity (ORP) Keogh plans non-qualified annuity life insurance contract Form 1099-R is delivered to account holders who had total or partial distributions in 2014 from these types of accounts. Conversions and recharacterizations, and certain other transactions, are also shown on Form 1099-R. A conversion is a distribution of money from a traditional, SEP or SIMPLE IRA that is rolled over to a Roth IRA. Who receives it? Recharacterization refers to the treatment of a contribution to one type of IRA as having been made to a different type of IRA, or to the treatment of a conversion to a Roth IRA as though it had not occurred. An external 1035 exchange is a reportable (tax free) replacement of an insurance policy for another insurance contract covering the same person that is performed in accordance with the conditions of Section 1035 of the Internal Revenue Code. A dividend on a participating life insurance contract is reportable and taxable once the total dividends paid out on a policy has exceeded the total premiums paid into the policy. Where is it reported? You will use information from Form 1099-R when completing IRS form 1040 or 1040A, and you may also need to report it on one or more of these IRS forms: Form 8606 (Nondeductible IRAs) Form 4972 (Tax on Lump-Sum Distributions) Form 5329 (Additional Taxes on Qualified Plans [Including IRAs] and Other Tax-Favored Accounts) 3

4 Form 1099-R 9800 FREDERICKSBURG ROAD Form 1040 Refer to the IRS instruction book for IRS Form 1040 for more information. Account Distributions The amount in box 1 of Form 1099-R should be reported on line 15a or 16a of IRS Form 1040 or line 11a or 12a of IRS Form 1040A. (Special reporting rules may apply for direct distributions to qualified charities made by taxpayers age 70 1 /2 or over. See IRS instructions for form 1040 or 1040A.) Taxable Life Insurance Dividends A dividend on a participating life insurance contract is reportable and taxable once the total dividends paid out on a policy has exceeded the total premiums paid into the policy. NOTE: The amount in Box 1 of Form 1099-R received as a result of a taxable life insurance dividend should be reported on line 16a. 4

5 Nondeductible IRAs OMB No Form 8606 Information about Form 8606 and its separate instructions is at Department of the Treasury Attach to Form 1040, Form 1040A, or Form 1040NR. Attachment Internal Revenue Service (99) Sequence No. 48 Name. If married, file a separate form for each spouse required to file Form See instructions. Your social security number Form 1099-R Fill in Your Address Only If You Are Filing This City, town or post office, state, and ZIP code. If you have a foreign address, also complete the spaces below. Form by Itself and Not With Your Tax Return Foreign country name Foreign province/state/county Foreign postal code Part 9800 I FREDERICKSBURG Nondeductible ROAD Contributions to Traditional IRAs and Distributions From Traditional, SEP, and SIMPLE IRAs SAN ANTONIO, Complete TX this part only if one or more of the following apply. You made nondeductible contributions to a traditional IRA for You took distributions from a traditional, SEP, or SIMPLE IRA in 2014 and you made nondeductible contributions to a traditional IRA in 2014 or an earlier year. For this purpose, a distribution does not include a rollover, one-time distribution to fund an HSA, conversion, recharacterization, or return of certain contributions. You converted part, but not all, of your traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2014 (excluding any portion you recharacterized) and you made nondeductible contributions to a traditional IRA in 2014 or an earlier year. Form 8606 from January 1, 2015, through April 15, 2015 (see instructions) Nondeductible IRAs OMB No Form 8606 Enter your total basis in traditional IRAs (see instructions) Add lines 1 and 2. Information.... about.. Form and. its. separate... instructions.... is. at Department In of 2014, the Treasury did you take a distribution Attach No to Form 1040, Form Enter 1040A, the amount or Form from 1040NR. line 3 on line 14. Attachment Internal Revenue Service (99) from traditional, SEP, or SIMPLE IRAs, Do not complete the rest of Part I. Sequence No. 48 Name. If married, file a separate form for each spouse required to file Form See instructions. Your social security number 4 Enter those contributions included on line 1 that were made from January 1, 2015, through April 15, Home address (number and street, or P.O. box if mail is not delivered to your home) Apt. no. 5 Subtract line 4 from line Fill in Your Address Only 6 Enter the value of all your traditional, SEP, and SIMPLE IRAs as of If You Are Filing This City, town or post office, state, and ZIP code. If you have a foreign address, also complete the spaces below. December 31, 2014, plus any outstanding rollovers (see instructions).. 6 Form by Itself and Not 7 Enter your distributions from traditional, SEP, and SIMPLE IRAs in With Your Tax Return Foreign country name Foreign province/state/county Foreign postal code Do not include rollovers, a one-time distribution to fund an HSA, conversions to a Roth IRA, certain returned contributions, or Part Irecharacterizations Nondeductible of traditional Contributions IRA contributions to Traditional (see IRAs instructions) and Distributions. From Traditional, SEP, and SIMPLE IRAs 7 Complete this part only if one or more of the following apply. 8 Enter the net amount you converted from traditional, SEP, and SIMPLE You made nondeductible contributions to a traditional IRA for IRAs to Roth IRAs in Do not include amounts converted that you later recharacterized You took distributions (see instructions). from a traditional, Also enter this SEP, amount or SIMPLE on line IRA 16 in and you made nondeductible contributions to a traditional IRA in 2014 or an earlier year. For this purpose, a distribution does not include a rollover, one-time 9 Add lines 6, 7, and distribution to fund an HSA, conversion, recharacterization, or return of certain contributions. 10 Divide line 5 by line 9. Enter the result as a decimal rounded to at least You converted part, but not all, of your traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2014 (excluding any portion 3 places. If the result is or more, enter you recharacterized) and you made nondeductible contributions to a traditional IRA in 2014 or an earlier year. 11 Multiply line 8 by line 10. This is the nontaxable portion of the amount 1 you Enter converted your nondeductible to Roth IRAs. contributions Also enter this to traditional amount on IRAs line for ,.. including. 11 those made for 2014 from January 1, 2015, through April 15, 2015 (see instructions) Multiply line 7 by line 10. This is the nontaxable portion of your 2 Enter your total basis in traditional IRAs (see instructions) distributions that you did not convert to a Roth IRA Add lines 1 and Add lines 11 and 12. This is the nontaxable portion of all your distributions In 2014, did you take a distribution No Enter the amount from line 3 on line Subtract line 13 from line 3. This is your total basis in traditional IRAs for 2014 and earlier years 14 from traditional, SEP, or SIMPLE IRAs, Do not complete the rest of Part I. 15 Taxable or make a amount. Roth IRA conversion? Subtract line 12 from line 7. If more than zero, also include this amount on Form Yes If you made nondeductible Go to line 4. IRA contributions for 2014 or in previous 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b Enter those contributions included on line 1 that years, were made report from the January amount 1, 2015, of these through contributions April 15, 2015on IRS 4 Note. You may be subject to an additional 10% tax on the amount on line 15 if you were under Form Subtract line 4 from line Nondeductible age 59½ at IRA the time Contributions of the distribution (see instructions). (Nondeductible IRAs).. to. determine.... the. taxable... portion. 5 of your 6 Enter the value of all your traditional, SEP, and SIMPLE IRAs as of For Privacy Act and Paperwork Reduction Act Notice, see distribution. separate instructions. Report the distribution Cat. amount No F from box 1 of Form 1099-R 8606 (2014) December 31, 2014, plus any outstanding rollovers (see instructions).. 6 on line 7 or 8 of Form Enter your distributions from traditional, SEP, and SIMPLE IRAs in Do not include rollovers, a one-time distribution to fund an HSA, conversions to a Roth IRA, certain returned contributions, or recharacterizations of traditional IRA contributions (see instructions). 7 8 Enter the net amount you converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in Do not include amounts converted that you later recharacterized (see instructions). Also enter this amount on line Add lines 6, 7, and Divide line 5 by line 9. Enter the result as a decimal rounded to at least 3 places. If the result is or more, enter Multiply line 8 by line 10. This is the nontaxable portion of the amount you converted to Roth IRAs. Also enter this amount on line Home address (number and street, or P.O. box if mail is not delivered to your home) 1 Enter your nondeductible contributions to traditional IRAs for 2014, including those made for 2014 or make a Roth IRA conversion? Yes Go to line 4. Apt. no. 5

6 Form 1099-R 9800 FREDERICKSBURG ROAD Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts Attach to Form 1040 or Form 1040NR. Department of the Treasury Internal Revenue Service (99) Information about Form 5329 and its separate instructions is at Name of individual subject to additional tax. If married filing jointly, see instructions. OMB No Attachment Sequence No. 29 Your social security number Home address (number and street), or P.O. box if mail is not delivered to your home Apt. no. Fill in Your Address Only City, town or post office, state, and ZIP code. If you have a foreign address, also complete If You Are Filing This the spaces below (see instructions). Form by Itself and Not If this is an amended With Your Tax Return return, check here Foreign country name Foreign province/state/county Foreign postal code Additional Taxes on Qualified Plans OMB No Form 5329 (Including IRAs) and Other Tax-Favored Accounts If you only owe the additional 10% tax on early distributions, you may be able to report this tax directly on Form , line 59, or Form 1040NR, line 57, without filing Form See the instructions for Form 1040, line 59, or for Form 1040NR, line 57. Attach to Form 1040 or Form 1040NR. Department of the Treasury Part I Additional Tax on Early Distributions Attachment Internal Revenue Service (99) Information about Form 5329 and its separate instructions is at Sequence No. 29 Complete this part if you took a taxable distribution before you reached age 59½ from a qualified retirement plan (including an Name of individual IRA) subject or modified to additional endowment tax. If married contract filing jointly, (unless see you instructions. are reporting this tax directly on Form 1040 or Form Your 1040NR see social security above). number You may also have to complete this part to indicate that you qualify for an exception to the additional tax on early distributions or for certain Roth IRA distributions Home address (see instructions). (number and street), or P.O. box if mail is not delivered to your home Apt. no. 1 Early distributions included in income. For Roth IRA distributions, see instructions Fill 2 in Your Early Address distributions Only included City, on town line or 1 post that office, are not state, subject and ZIP to code. the If additional you have a foreign tax (see address, instructions). also complete If You Are Enter Filing the appropriate This exception the spaces number below (see from instructions). the instructions: Form by Itself and Not If this is an amended 3 Amount subject to additional tax. Subtract line 2 from line With Your Tax Return return, check here 4 Additional tax. Enter 10% (.10) Foreign of line country 3. Include name this amount on Form 1040, Foreign line province/state/county 59, or Form 1040NR, line 57 Foreign 4 postal code Caution: If any part of the amount on line 3 was a distribution from a SIMPLE IRA, you may have to include 25% of that amount on Box line 74 of instead Form of 1099-R 10% (see identifies instructions). the code for the distribution you received. If Part you only owe the additional 10% tax on early distributions, you may be able to report this tax directly on Form 1040, line 59, or Form Distribution II Additional 1040NR, line 57, Code Tax on Certain without filing Form See Distributions Instructions From See the instructions for Recipient, Education for Form Box Accounts 1040, 7, of line your 59, or Form for Form 1099-R 1040NR, for line an explanation 57. Part I Complete Additional this Tax part on if Early you included Distributions of the code(s). an amount in income, on Form 1040 or Form 1040NR, line 21, from a Coverdell Complete education this savings part account if you took (ESA) a taxable or a qualified distribution tuition before program you reached (QTP). age 59½ from a qualified retirement plan (including an 5 Distributions IRA) or modified included endowment in income contract from Coverdell (unless you ESAs are and reporting QTPs this.. tax. directly... on. Form or. Form. 1040NR see 5 above). You 6 Distributions may also have included to complete on line 5 this that Code part are to 1 not indicates subject that to distributions you the additional qualify for made an tax exception (see before instructions) to you the additional reached... tax age on 6 59 early 1/2 distributions and that or are, for certain Roth IRA distributions (see instructions). 7 Amount subject to additional tax. 1 Early distributions included in income. in Subtract general, line For Roth subject 6 from line IRA distributions, to a 5 10%.. see additional.... instructions tax... You.. may.. be. required 7 1 to file Form 8 Additional tax. Enter 10% (.10) of line 7. Include this amount on Form 1040, line 59, or Form 1040NR, line Early distributions included on line 1 that are not subject to the additional tax (see instructions). Part III Additional Tax on Excess Contributions to Traditional IRAs Enter the appropriate exception number from the instructions: Complete this part if you contributed more to your traditional IRAs for 2014 than is allowable or you had an amount on line 3 Amount 17 of subject your 2013 to additional Form tax. Subtract line 2 from line Distribution Additional tax. Code Enter 10% 1 (.10) of line 3. Include this amount on Form 1040, line 59, or Form 1040NR, line Enter your excess contributions from However, line 16 of your as explained 2013 Form 5329 in the (see Form instructions) If instructions, zero, go to line 15 certain 9 exceptions to the Caution: If any part of the amount on line 3 was a distribution from a SIMPLE IRA, you may have 10 to If include your traditional 25% of that IRA amount contributions on line 4 instead for 2014 of 10% are (see less instructions). than your maximum allowable contribution, see instructions. Otherwise, enter Part II Additional Tax on Certain Distributions From Education Accounts traditional IRA distributions included in income (see instructions) Complete distributions this of part prior if year you excess included contributions an amount (see in income, instructions) on Form or Form 1040NR, line 21, from a Coverdell education savings account (ESA) or a qualified tuition program (QTP). 13 Add lines 10, 11, and Distributions included in income from Coverdell ESAs and QTPs 5 14 Prior year excess contributions. Subtract line 13 from line 9. If zero or less, enter Distributions included on line 5 that are not subject to the additional tax (see instructions) 6 15 Excess contributions for 2014 (see 7 Amount subject to additional tax. line instructions) Subtract line 6 from line Total excess contributions. Add lines 14 and Additional tax. Enter 10% (.10) of line 7. Include this amount on Form 1040, line 59, or Form 1040NR, line Additional tax. Enter 6% (.06) of the smaller of line 16 or the value of your traditional IRAs on December 31, 2014 Part III Additional Tax on Excess Contributions to Traditional IRAs (including 2014 contributions made in 2015). Include this amount on Form 1040, line 59, or Form 1040NR, line Complete this part if you contributed more to your traditional IRAs for 2014 than is allowable or you had an amount on line Part Distribution IV 17 Additional Code of your 2013 Tax D Form on Excess contracts Contributions that may to Roth be subject IRAs to the net investment income tax. Complete this part if you contributed more to your Roth IRAs for 2014 than is allowable or you had an amount on line 25 of your 2013 Form Enter your excess contributions from line 16 of your 2013 Form 5329 (see instructions). If zero, go to line Enter your excess contributions from line 24 of your 2013 Form 5329 (see instructions). If zero, go to line If your traditional IRA contributions for 2014 are less than your 19 If your Roth IRA contributions for 2014 are less than your maximum maximum allowable contribution, see instructions. Otherwise, enter allowable contribution, see instructions. Otherwise, enter traditional IRA distributions included in income (see instructions) distributions from your Roth IRAs (see instructions) distributions of prior year excess contributions (see instructions) Add lines 19 and Form (Additional Taxes on Qualified Plans [Including IRAs] and Other Tax-Favored Accounts). Report the amount in box 2a of your Form 1099-R on Form 5329, line 1. additional tax apply with respect to qualified withdrawals for first-time homebuyers expenses, higher education expenses, medical insurance premiums and deductible medical expenses. If your Form 1099-R shows distribution code 1 in box 7 and you qualify for an exception to the additional tax, you should file Form 5329 and report the amount from box 2a of your Form 1099-R that can be excluded on Form 5329, Reports payments from nonqualified annuities and distributions from life insurance 6

7 Form 1099-R 9800 FREDERICKSBURG ROAD State Income Tax Any state income tax withheld from account distributions will be shown in box 12. For more information on retirement account distributions, see IRS Publication 590 (Individual Retirement Arrangements). 7

8 Frequently Asked Questions State Tax Reporting Q. Does USAA report any tax information to the states for state income tax purposes? A. Tax information is required to be provided to some states and the District of Columbia. USAA Life Insurance Company participates in the combined federal and state tax filing with the IRS, which in turn forwards this information to the District of Columbia and these states: Alabama Arizona Arkansas California Colorado Connecticut Delaware Georgia Hawaii Idaho Indiana Kansas Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska New Jersey New Mexico North Carolina North Dakota Ohio South Carolina Utah Vermont Virginia Wisconsin USAA Life Insurance Company also files directly, when required, to these states and territories: Arkansas California Delaware Guam Idaho Kansas Maine Mariana Islands Massachusetts Michigan Montana New Jersey New York North Carolina North Dakota Oklahoma Puerto Rico Virgin Islands