I've been looking through all the Q&A on this issue, and also read the IRS instructions 1040. I was thinking like most everyone that this must be a TT error, but now that I read the instructions for all of the Line 4 components, I'm not so sure. Anyone have opinions on the IRS making this as confusing as TT? Take a look at these references:
Under IRA Distributions, "More than one distribution. If you (or
your spouse if filing jointly) received
more than one distribution, figure the
taxable amount of each distribution and
enter the total of the taxable amounts on
line 4b. Enter the total amount of those
distributions on line 4a." So this must refer to IRA distributions only to this point of the instructions.
Under Fully Taxable Pensions and Annuities, "If your pension or annuity is
fully taxable, enter the total pension or
annuity payments (from Form(s)
1099-R, box 1) on line 4b; don’t make
an entry on line 4a." So this seems to say that for a pension that is fully taxable due to the typical rules, then you do NOT enter the amount on 4a of 1040. Which makes TT correct in how it reports this.
Under Partially Taxable Pensions and Annuities, "Enter the total pension or annuity payments (from Form 1099-R, box 1) on line 4a. …. If your Form 1099-R shows a taxable amount, you can report that amount on line 4b." There are several rules about what happens if the 1099-R does not show a taxable amount vs. gross amount, but this is the situation where the IRS says that a pension amount would be included in line 4a.
So I tested this with my fully taxable pension. Currently as I think it should be reported both the gross and taxable amounts are the same and are NOT included in line 4a. But if I change the taxable amount on the 1099 to be less than the gross amount, then presto, the gross amount is included on 4a just as we all expected and only the taxable amount is shown in 4b. So the net is I think TT is working as described in the 1040 Instructions from the IRS.
What do others think of this?
