Disability retirement BEFORE MRA reached but now reached MRA

[zurcher]

My husband retired under disability in 2021 before he met MRA.  He me MRA in tax year 2022.  

For the 2023 filing Turbo tax asks two questions:  Age on the date the annuity started (8/1/2021)  = I provide his age.  got that.  check.  

Next question is:  "I am under retirement age for this plan"  Yes or No.     What is that asking?  Is it asking is his current age (still) less than MRA?   Or, is it asking, do you current qualify (fall UNDER?) retirement age for this plan?  Or something else?       

For future releases, I would suggest TT provide prompts based on the birthdate provided and then put the question into context.

[dmertz · Accepted solution]

If he reached minimum retirement plan in 2022, he is over the minimum retirement age in 2023 and the answer  to provide 2023 TurboTax is No, he was not under the minimum retirement age at any time in 2023.  (The plan should probably have changed the code to code 7 instead of code 3 since they should know he is no longer under the MRA.)

TurboTax asks the question because disability distributions received before minimum retirement age are to be treated as wages.  Disability distributions received after minimum retirement age are to be treated as ordinary retirement income.

[zurcher]

Thank you the response is helpful.

The code in distribution is still set to "3"/ disability.  I will have him call and see if that should/can be changed.

[dmertz]

I probably should have said that there is no tax difference between code 3 and code 7 when the individual has reached the MRA for the plan and is over age 59½.  As long as you know to answer that the individual is not under the MRA for the plan, there is no need for the code to change.  There might be some administrative reason that the plan would continue to use code 3.

[sdsym77]

I am having some of the same issues, the only thing it will have a bearing on is any EITC you could possible qualify for. Will the IRS allow you to split a 1099R in the middle of the year on the DAY MRA is actually reached. In my case it will cost me over 3k in Earned income credit if I have to count the WHOLE year as earned.

[dmertz]

Splitting the Form 1099-R seems reasonable since that's what the payer should have done.  You would use code 3 for amounts received before MRA and code 7 for amounts received on or after MRA.