@patzoo
I see the issue - because the distribution code on the spouse's CSA-1099-R is 3 (disability) instead of 7 (normal), the Arkansas Retirement Exclusion worksheet is using the gross distribution for 2a, 2c, and 2d.
If you change the distribution code to 7, then 2a and 2c are the gross (as they should be), and 2d is the taxable amount, as determined by the Simplified Method and reported on the 1040.
The Arkansas Instructions for line 18a and 18b are confusing. Line 18a specifically states that you should start with the taxable amount, which is either line 2a or what was determined by the Simplified Method.
But the instructions for 18b do not state this. They state, "You are eligible for the $6,000 exemption for retirement or disability benefits provided the distribution was from public or private employment-related retirement systems, plans, or programs." The literal reading is that the $6,000 is removed from the gross amount, not the taxable amount (because it says "retirement benefits" and not "taxable benefits" like for line 18a).
So, you get what you expect if the distribution code is 7 but not if it is 3. I do not know yet if this is correct.
You asked what you could do besides printing and changing your return.
The amount of cost being recovered in 2020 is $236 (you can see this if you toggle the distribution code). If you wish to leave the distribution code as 3 (so the IRS won't wonder why you changed it), you can still get TurboTax to report the correct state income.
To "fix" your return in TurboTax (if you choose to do this, as I said, I do not know yet which way is correct), you will have to use an override in Forms mode (if you have the CD/download software).
1. Go to form AR1000F
2. on line 22, click on QuickZoom button
3. This will open form AR-OI
4. On line 13 column B, right-mouse click on this field and click on Override
5. Enter 236 (the amount of cost that is getting taxed) into this box
6. If you want, in the line 13 worksheet just below, enter "return of cost on CSA-1099-R" for description and enter 236 in column B
7. When you entered the override on line 13, this should have automatically updated lines 14, 15 and line 22 back on the AR1000F, reducing your state taxable income by $236.
OK?
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