1099-R with Type 3 Distribution

[catlady67]

I took a disability type 3 distribution from 401K and federal was withheld but there is no taxable amount. I believe 2a should match 1 in this case and 16 should also be the same amount. Can anyone confirm? I believe 0.00 in 2A is wrong and 16 blank is wrong, that both should match box 1.  I should be exempt from the 10% penalty but not taxes altogether. Not at retirement min age yet and funds came to me less the withholding. Thank you

[MinhT1]

Yes, you are correct.

Distributions from a 401(k) plan are taxable at the Federal level.

Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — have no state income taxes.

Three other states do not tax distributions from 401(k) plans (Illinois, Mississippi and Pennsylvania).

So, box 2a and box 16 (where there is state tax) should eqaul box 1. But just enter your form 1099-R as you receive it and TurboTax will figure the tax.

If you are disabled (code 3 in box 7) you are exempt from the 10% early withdrawal penalty.

[catlady67]

Thank  you, the 1099-R is incorrect then.  I will go back to the issuing company.  I did enter the 1099-R in Turbotax as received, and because 0.00 is in 2A, it does not do the calculations correctly.  It is also not calculating state correctly.  One distribution was in one state, and one in another state as I moved before end of year, so I need to figure out why state taxes are double counting also in Turbotax online.

[DianeW777]

Once you figure out the taxable amount for federal you can calculate the state amounts (if necessary), depending on which state you live in.  The information provided by our awesome Tax Expert @MinhT1 shows the state information.

If your are unsure about the amount for each state, you can do the following:

• If the income was received evenly throughout the year, or period of time during the part of the year you received it, you can divide the total by the number of months you received it, then multiply it by the number of months you lived in each state. 

When you enter the Form 1099-R, you should use two state lines and enter the taxable amount for each state and the correct withholdings as printed om the 1099-R.

[catlady67]

They are amounts that go to one state or another in full, and the states are clear on the W2's and 1099-R forms.  However, it seems Turbotax still includes them in the wrong states as taxable income when they were not received in a particular state.

[MarilynG1]

If no state info is showing on your 1099-R, that's ok. Just enter it as issued (except for the 2a). Since many retired folks move around, it's not unusual for no state taxes to be collected on a 1099-R distribution. 

Since you lived in two states, you need to allocate the distribution of this unearned income between them.

If you lived in one state for six months, for example, allocate 50% of your 1099-R distribution to that state on your Part-Year Resident return, and the other 50% to the other state on your Part-Year Resident return.

Click this link for steps on Allocating Income as a Part-Year Resident.