Retirement tax questions

Seeing "UNKNOWN" in Box 2a of your 1099-R is essentially a message from the payer (the bank or pension administrator) saying they don't know how much of the disbursement you might have already paid taxes on in the past. 

It is up to you to determine the taxable amount. In most cases, it is either the full amount or a calculation based on your "basis" (after-tax contributions).

Most retirement distributions are 100% taxable because the money was put in "pre-tax." However, if you ever contributed money from your own paycheck that was already taxed (after-tax contributions), you are allowed to get that specific money back tax-free. Because the payer might not have records of your contributions from 20 or 30 years ago, they mark it as "UNKNOWN" to avoid giving you the wrong tax advice.

When entering this into TurboTax:

1. Leave Box 2a empty on the entry screen.
2. Check the first box in Box 2b (Taxable amount not determined).
3. TurboTax will then ask follow-up questions to help you calculate the taxable portion.

The most common scenarios for box 2a being unknown:

Standard 1099-R (Private Sector / 401k / IRA)

If this is from a standard company pension or a traditional IRA, and you know you never made after-tax contributions: You can simply enter the same amount from Box 1 into Box 2a and the entire distribution is treated as taxable income. This is the most common outcome for private-sector employees.

Public Sector 1099-R (Federal / CSA / CSF / Military)

This is where "Unknown" is most frequently seen. The Office of Personnel Management (OPM) often lacks your final contribution data. TurboTax will walk you through using the Simplified Method. You will need to know your "Plan Cost" (the total after-tax money you put in, usually found in Box 9b) and your age when you retired. The software will spread your tax-free "basis" over your expected lifetime, making a small portion of your pension tax-free every year.