Did you all get this sorted out? My borough knew it was not taxable but they withheld my taxes all last year and for retro pay I got for 2 years before. I knew they would make me jump through hoops. But 1.104.1 explains that disability compensation as a disability pension where the benefit amount is not calculated as to age, length of service or prior contributions, it is excludable form gross income. TT employees have only very basic knowledge and don't really know much about unusual or "rare" situations. After forwarding the police pension ordinance adopted by my municipality which says the disability pension must be calculated on the salary at time of disability(or honorable discharge which case-law defines as the date of disability for those that go years in the injury and are determined perm disabled), PA Act 600, as well as 1.104.1, they corrected my 1099-R. I suggest to anyone that finds this in the future, speak with a cpa that will listen to you. More have dealt with these situations that have been in business for a long time. Talk with a cpa who gets the issue and understands it or is open to understanding it. If they don't know, a good cpa will consult others. But if box 2a has an amount listed, it's good to start with your municipality. If they can fix it, you will have smooth sailing.
