Dear Mary,
My apologies I misspoke and misled you. Let my try again to give you the correct and complete info.
After retiring last year I rolled over my employer pension plan to an external investment company. So my employer issued two Form 1099-R, #1 for an RMD amount I had to take as per the IRS rules, #2 for the balance amount rolled over for direct transfer to the investment company.
#1 1099-R shows Box 7, code "7" (i.e., normal distribution), this RMD amount is also shown on Line 16 "Gross Distribution" for the PA State in addition to the Federal Gross distribution on Line 1 which is fine. For this #1 1099-R, PA State TT does NOT ask me the question, if this distribution/amount is PA taxable or not. Consequently, it includes this RMD amount as my PA taxable income. It was incorrect when I said even when I zero out the Line 16 amount, TT cannot remove the amount I originally entered into TT.
For the #2 1099-R, Box 7 shows code "G" (ie, direct rollover of a distribution to a qualified plan or IRA). The amount from this 1099-R is not carried over to the PA State Gross Distribution. Turbo Tax does ask the question whether this distribution from Federal Line 1 is PA taxable or not which I correctly answered and it does not show on my PA return.
Does TT has a way around to force the PA Gross Distribution on #1 1099-R to exclude it from PA state wages and income on PA-40, Line 1. The PA state rules are very clear that any retiree income including the RMD are not taxable in PA.
