Yes, box 14 is the amount of state tax withheld on your distribution, so it should be a number or blank. Since they typed in the word exempt, I am sure no state tax was withheld, so leave this field blank.
The state abbreviation belongs in box 15, not 16. Box 16 is the amount of the distribution taxable in your state, so that should also be blank.
If you need to return to these fields, this is how to do that:
- Open your return and make sure you are in the Federal section.
- Select Wages & Income.
- Find IRA, 401(k), Pension Plan Withdrawals (1099-R), on the list, click Start or Review to the right.
- Select Edit to the right of the 1099-R.
- Click Continue until you get to Enter your 1099-R details from (name).
- Scroll to the bottom and delete any entries for boxes 14, 15 and 16.
- Continue with your return.
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