It is not employee compensation. It is a length of service award program which is a defined benefit/capital accumulation plan. It is a 'retirement' plan for volunteers, with vested monies transferable to a qualified retirement plan on the end of service. As such, no taxes should need to be paid until retirement withdrawal.
But the municipality sent an 1099-NEC not a 1099-R, citing 'new rules' for NEC and because separating volunteers have the OPTION to cash the check and pay the tax, or roll it over. So not knowing which option will be chosen, they have to send an NEC not an R.
There is no option to enter a 1099-NEC in TurboTax without paying tax and creating a business. There is no option to enter any other income without paying tax.
I ended up entering a manual/substitute 1099-R and providing an explanation on the entry in TT as I have here. We will see what the IRS says, but in this situation, it seems TurboTax needs to allow for the 'rare' instance such as this of an NEC being a non-taxable retirement plan payout eligible for rollover.
