1042 S Confusion Where do I input this income?

Normally preparing my taxes is easy, but this year it has been a headache. 
 
I am a US citizen, I live in abroad and work as a US contractor on a US military base. For that reason I file exempt under foreign earned income exclusion based on the physical presence test.
 
In 2019 I switched employers (still a contractor overseas) and in 2020 I took part of the money from my 401a and rolled a portion of it into a 401K with my new employer and I kept the remainder for myself (fidelity taxed the amount that I withdrew before cutting me a check). 
 
Because I am living overseas and have a military address the investment agency, fidelity, placed this income on a Form 1402-S instead of a 1099 and I cannot find anywhere on turbo tax to input this income. I am unsure how to declare this.
 
Through my research it looks as if I declare it as income and because my tax residence is in a foreign country, it's included in my tax exempt income for the calendar year. However I may be wrong and would like to be sure that I file correctly. The Income code is 15 and the exemption code is Chapter 3 Code 2. No taxes were withheld. 
 
LinaJ2020
Expert Alumni

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You would enter under Pension section in your TurboTax program.  Here are the steps:

 

In TurboTax online,

  • Sign into your account and select Pick up where you left off
  • At the right upper corner, type in 1099r, then Enter
  • Select Jump to 1099r
  • Next screen, Choose your bank or brokerage, select I'll type it in myself to continue
  • Follow prompts

The amount will shows on line 5 of your Form 1040.  If it's taxable, it will show on line 5b.  If it's not taxable, it will show on line 5a for reporting purposes. 

 

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Thank you for that information! 

 

I just have one other question. On my 1042S it just shows gross income in box 2. There are no box 5a or 5b. I only have box 5 that says "withholding allowance". How do I know if it's taxable or not?

DaveF1006
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It depends. Box 5 report exemption codes that are used for informational purposes. If there is a tax rate listed in Box 4b, then Box 5 is an exemption code. Some of the more common codes are. 

 

00 - amount is exempt from tax withholding
14 - nonresident with an F or J visa and has a scholarship
30 - all other nonresident

 

Exemption code - the reason for the tax rate. If there is a number in Box 5, then it is not taxable.  It is merely a code similar to a withholding allowance on a W2. Found at this link.

 

[Edited 03-30-2021|07:17 PM PST]

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Thank you sir! This is great information. The only difference I notice is that the spaces on my 1042S do not coincide with the breakdown provided on that website. They are similar but not exact.

 

In reviewing my form it shows Box 1 type of income, Code 5 (Pension, Annuities, etc.) 

Box 2 shows Gross Income.

Box 3 Chapter 3 Exempt Under IRC

Box 3a Exemption Code 02

Box 3b Tax Rate 0.0

Box 4a Exemption Code 15

Box 5 Withholding Allowance (Blank)

JeffreyR77
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It appears this is investment income.  Investment income would not be included in exempt income. 

 

The exemption codes on your Form 1042-S are linked to withholding requirements on the payer, not exempt income to the recipient. 

 

You should report this as income from a 1099-R however you may have problems efiling as you do not have all the information for Fidelity you would need to complete the 1099-R form. 

 

For 2020, there is an exemption of up to $100,000 of withdrawals from 401(k) accounts from the 10% early withdrawal penalty. 

 

You could add this withdrawal as  Less Common Income, Miscellaneous Income, Other Taxable Income and still be able to efile.