1099R from OPM - includes retroactive payment of 2 pensions

[Matanuska Mark]

I retired in 2021 and received interim payments on my CSRS annuity to 12-31-21. No problem with 1099R last year. There was a taxable amount in box 2a of1099R. Now it's time to do 2022 the 1099R says UNKNOWN. I just left it blank in TurboTax and it calculated it correctly. Here's the tricky part. I have a second annuity called "Voluntary Contributions" with OPM and it shows the amount on the bottom left of the same1099R for 2022. It didn't in 2021 so I assume there was no payment then since they were still calculating my final annuity. Those familiar with "Voluntary Contributions" annuity know the taxes were paid previously. On January 1, 2022 I received all of my retroactive balances from the annuities for 2021 (4 months worth). When I enter the information using the "Simplified Method" Turbo Tax asks how many months it was this for? I put 16 because that's how many months I way paid for in 2022 (12 months in 2022 + 4 months for 2021 paid retroactively). It's a no-go for TurboTax. It will only let me do 12 months which means I get to pay a few hundred extra bucks in taxes. Any ideas are appreciated if there's a way around this. 

[MaryK4]

You could try to enter the Voluntary Contributions as two separate entries- one with the 12 months and the second using 4 months- not 100% this will work but if it does not, post here and maybe someone will follow up.

[dmertz · Accepted solution]

I believe that this is a single contract, not two separate contracts, and each payment is a mix of pre-tax money and a portion of your voluntary investment in the contract.  The Simplified Method is used to determine the amount of investment in the contract each payment includes.  The Simplified method divides you investment in the contract by a number of months that depends on your age (or the combined ages of you joint annuitants) at the annuity starting date and each month's payment then includes that amount of investment in the contract until that number of months of payment have been received.  After that number of months have been paid and your investment in the contract has been fully recovered, monthly payments are fully taxable.

I agree with MaryK4 that the way to handle this in TurboTax is to enter the total as two separate Forms 1099-R.   This is what I would try:

For the main 1099-R, in box 1 enter 12 times your regular monthly payment.  When completing the Simplified Method information, enter your annuity starting date (9/1/2021), the Plan Cost (your voluntary investment in the contract), and 12 as the number of months payments were received in 2022.  TurboTax will divide your investment in the contract by the age-related factor and that will be the nontaxable portion of each regular monthly payments.  TurboTax will multiply the monthly number by 12 and subtract the result from the amount in box 1 to determine the taxable amount for this 1099-R.  Finally, enter 4 times the monthly nontaxable amount as the amount previously received so that TurboTax show the correct balance of cost remaining to be recovered.

When entering the second Form 1099-R, enter in box 1 the remaining amount shown in box 1 of the Form 1099-R you received.  In box 2a enter the amount in box 1 minus the amount previously received that you entered for the Simplified Method on the first 1099-R.

I suppose it's possible that doing as I described could result in an amount in box 1 of the second 1099-R being less than the amount determined as previously recovered, in which case you would need to reduce the number of months represented by the first 1099-R and increase by an equal amount the number of months represented by the second 1099-R.  Putting 1 month on the first 1099-R form and 15 months on the second 1099-R form would always work.  Ultimately what you are calculating with the Simplified Method is the proportion of investment in the contract included in each months annuity payment and you are effectively multiplying that by 16 to figure the combined nontaxable amount of the two 1099-R forms that you enter.

If the Form 1099-R is that if it shows tax withholding, I would split the tax withholding on to the two 1099-R forms in proportion to the number of months represented by each form.

The alternative would be to do all of the necessary calculations yourself on Worksheet A from IRS Pub 575 where you can multiply the amount on line 4 by 16 months to get the amount for line 5, enter in box 2a of the 1099-R the taxable amount determined on line 9 of the Worksheet A, not use the Simplified Method this year and then begin using the Simplified Method in 2023.  However, by splitting the Form 1099-R and using the Simplified Method this year, TurboTax will have the details to carry forward for use with next year's Form 1099-R.

[Matanuska Mark]

Both replies are genius! I used the manual worksheet to calculate what the remaining basis aka "balance of cost to be recovered" using 16 months so I had a target number to know when turbo tax was making the correct calculation. I created two 1099 R forms in Turbo Tax one for four months and the additional one for 12 months. I had to fiddle around with it in TurboTax a couple of times because the final "balance of cost to be recovered" line wasn't quite right. It finally matched once I typed in Turbo Tax that the second annuity started in the prior year so I could manually enter the previous amount recovered from the first 1099 R entered. Everything worked out great. Thanks!!