Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
normingram
New Member

Can I use 1099-R income to invest in a Roth in line 7 distribution is marked as 3 which is disability?

Can I use 1099-R income to invest in a Roth? Line 7 of the 1099 for distribution is marked '3' which is disability? My AIG is $83,359 for 2018.

1 Best answer

Accepted Solutions
Coleen3
Intuit Alumni

Can I use 1099-R income to invest in a Roth in line 7 distribution is marked as 3 which is disability?

It depends whether or not you have reached retirement age. 

Disability Pension Income 

Generally, taxpayers who retire on disability must include all of their disability payments in income. Disability payments are taxed as wages until the taxpayer reaches the minimum retirement age this age is set by the employer. After the taxpayer reaches the minimum retirement age, disability payments are treated as pension income to determine taxability. 

 Taxpayers are considered disabled if they cannot engage in any substantial gainful activity because of any medically determinable physical or mental condition that can be expected to result in death or to be of long-continued and indefinite duration. Minimum retirement age is generally the earliest age at which taxpayers may receive a pension, whether or not they are disabled. 

Employers may report disability income on one of the following forms: • Form W-2, if the taxpayer has not reached the minimum retirement age set by the employer • Form 1099-R, if the taxpayer has reached the minimum retirement age Some employers report qualified disability income on Form 1099-R with Distribution Code 3 in box 7 regardless of the taxpayer’s age. You must confirm the employers’ minimum retirement age. If the taxpayer is under the retirement age, the volunteer must take steps in the software to ensure the income is properly reflected as wages on Form 1040. When disability pay is treated as wages, it might affect the earned income credit and the taxpayer’s ability to make an IRA contribution

https://apps.irs.gov/app/vita/content/globalmedia/4491_retirement_income.pdf

View solution in original post

1 Reply
Coleen3
Intuit Alumni

Can I use 1099-R income to invest in a Roth in line 7 distribution is marked as 3 which is disability?

It depends whether or not you have reached retirement age. 

Disability Pension Income 

Generally, taxpayers who retire on disability must include all of their disability payments in income. Disability payments are taxed as wages until the taxpayer reaches the minimum retirement age this age is set by the employer. After the taxpayer reaches the minimum retirement age, disability payments are treated as pension income to determine taxability. 

 Taxpayers are considered disabled if they cannot engage in any substantial gainful activity because of any medically determinable physical or mental condition that can be expected to result in death or to be of long-continued and indefinite duration. Minimum retirement age is generally the earliest age at which taxpayers may receive a pension, whether or not they are disabled. 

Employers may report disability income on one of the following forms: • Form W-2, if the taxpayer has not reached the minimum retirement age set by the employer • Form 1099-R, if the taxpayer has reached the minimum retirement age Some employers report qualified disability income on Form 1099-R with Distribution Code 3 in box 7 regardless of the taxpayer’s age. You must confirm the employers’ minimum retirement age. If the taxpayer is under the retirement age, the volunteer must take steps in the software to ensure the income is properly reflected as wages on Form 1040. When disability pay is treated as wages, it might affect the earned income credit and the taxpayer’s ability to make an IRA contribution

https://apps.irs.gov/app/vita/content/globalmedia/4491_retirement_income.pdf

Dynamic AdsDynamic Ads
Privacy Settings
v