distribution from Non Qualified plan not getting picked up as taxable by TT?

[pfbegin]

For years I've been receiving a W-2 for annual distribution from a non-qualified plan and it gets picked by TT as wages on line 1a of 1040. On my W-2 the amount shows up in both Line 1 and Line 11. This year, there's a new question in TT that asks the question that I have cut & paste at bottom of this post.

If I answer "yes" (which is correct), the amount is not included in income on my 1040. If I answer "no" which is incorrect, the amount IS included in income. It looks like I have to answer the question incorrectly to get the right result on my 1040? Here's the question:

Did you take money out of your nonqualified pension plan?

We just need to check whether the $xxxx in box 11 is money you contributed to your plan, or if it's money you took out of your plan.

Yes, I took this money out of my nonqualified or Section 457 plan.

No, this is money I contributed to my nonqualified or Section 457 plan.

[ThomasM125]

I assume the distribution is showing in box 1 and box 11 on your W-2 form. If you answer "yes" to the question indicating that you took a distribution, the distribution amount will be removed from your wage entry on line 1 of form 1040, and it will be entered on line 8(t) of schedule 1 (Additions to Income)  and as such it will appear as other income on your tax return. That may be why you say it is not included on your form 1040, because you don't see it in line 1, but it is in line 8 of your form 1040. So, it is not being eliminated, just reclassified. So you should answer yes to that question.

You can view your form 1040 and schedules 1 to 3 while working in the online version of TurboTax by following these steps:

1. Click on Tax Tools in the left menu bar
2. Click on Tools
3. Look under Other Helpful links….
4. Choose View Tax Summary
5. Look in the left menu bar and choose Preview my 1040
6. Scroll down the page to see form 1040 and schedules 1 to 3

[pfbegin]

i had seen another post on this topic and the person reported that his return was rejected because his W-2s did not tie out to line 1a. Apparently this is resolved now because i just filed as you suggest (using the line 😎 and my return was accepted. Thanks!!!

[williasp]

Doing your taxes is crazy enough without getting inconsistencies from one year to the next.  But thanks for the explanation, which I accidentally noted when I pulled up the forms in my return. 

I was wondering why my two year summary showed w2 income last year and zero this year.  That number should be exactly the same every year.  Sure enough, I opened the 1040 and noticed that the w2 amount now appeared on line 8t as "other income" instead of on line 1 as in prior years.  I initially thought this must be an error, particularly since the amount always appeared on line 1.  But when you go through the step-by-step, you have no choice but to answer the question that says "yes, I took the amount as a distribution" or some such thing because the other answer implies that you took out your own contribution, which is clearly wrong.  Ugh!

Like I said at the beginning, doing taxes is tough enough without  seeing odd inconsistencies in how the forms get filled in.  I always look at the forms and the final return before filing just to insure that everything looks OK.  Not seeing a w2 number in Line 1 is a glaring red flag that required me to plow through and try to figure out what the heck happened.  Sheesh!

[mrayak]

I have tried the suggestion by selecting “yes” for distribution and entering the same amount in the required state box that populates.  After doing so I get an error message in the federal review that “ the total amount of section 457 state distributions does not match with the amount of section 457 distributions reported on the federal return, adjust the state entries as needed” even though the amounts are the same. Please help if possible. Thanks.  the total amount of section 457 state distributions does not match with the amount of section 457 distributions reported on the federal return, adjust the state entries as needed

[AnnetteB6]

The situation you described regarding an error flagging state distributions from a 457 account is a known customer experience that is being addressed by the TurboTax development team.  It is expected to be resolved after 2/2/2024.  

@mrayak 

[PADenny]

I am having a somewhat related issue.  I have been using TurboTax for many years and this is the first year that I am receiving an error message regarding a W-2 for monthly payments received from a nonqualified pension plan.  The W-2 contains exactly the same information for 2023 as in past years.  The payments are taxable for Federal purposes, but not for Pennsylvania (where I reside).  The W-2 contains "PA" and the employer number in Box 15, and $0.00 in both Boxes 16 and 17.

I am receiving a Smart Check error message stating:

"Form W-2 (XYZ Corp.): Nonqualified Distribution (State ID) does not match with any states entered in Box 15.

Nonqualified Dist (St ID)    PA"

 I have tried not entering anything in boxes 15 - 17 in TurboTax; entering information in box 15 but leaving boxes 16 and 17 empty; and entering the information in all 3 boxes (15 - 17) in TurboTax.  The error message was received under all 3 of these approaches.

Thoughts on how to address this error message?

[MonikaK1]

From your description (assuming it says Nonqualified Dist not Diet), it appears that the error may have to do with the fact that you have a State ID and employer ID on the W-2, but no state wages or state tax withheld, or that the format of the State ID is not as expected for that State. If you see the error in Review, the program will normally provide a screen with the error highlighted and ask for an action to correct it.

You might also try going back to the W-2 interview to see whether the answer to a particular question about the W-2 caused the error, or if the State employer ID number was entered correctly. In the alternative, if there are no state wages or stage withholding, try deleting the Box 15 entries altogether, or deleting the entire W-2 and reentering it without Box 15.

[ashishsanghrajka]

I have the same situation. By selecting "Yes" not only it is reclassifying from Line 1a to Schedule 1 line 8(t), I don't see EIC on line 27. So last many year I got EIC and now with this year's change I don't get EIC.

While nothing has changed for last many years and I was getting EIC credit for last many years, with this this

change, I don't get EIC credit. Can you please advise on the loss of the EIC credit is an issue with this change of treatment from 2023. Thanks   

[PADenny]

As I understand it, line 8 is the proper place for this income (beginning for TY 2022).

I have no input as to EIC as it is not relevant to me.  Sorry I can't help.

[CatinaT1]

Are you sure you qualify for EIC?

You qualify for the EITC if:  

• you have earned income and your adjusted gross income is within certain limits; AND  
• you meet certain basic rules (investment income limits, age, etc); AND  
• you either:  
• meet the rules for those without a qualifying child; OR  
• have a child that meets all the qualifying child rules for you (or your spouse if filing a joint return).  

Use the EITC Assistant to find out your filing status, your child’s status as a qualifying child, your eligibility for the credit, and estimate the amount of the credit you may get.  

For additional information, go to this IRS website.  

[Durrell47]

I have been using TurboTax for many years and this is the first year that I am receiving an error message regarding a W-2 for monthly payments received from a nonqualified pension plan.  The W-2 contains exactly the same information for 2023 as in past years.  The payments are taxable for Federal purposes, but not for Pennsylvania (where I reside).  The W-2 contains "Blank"  in Box 15, and "Blank" in both Boxes 16 and 17.

I am receiving a Smart Check error message stating:

"Form W-2 (XYZ Corp.): Nonqualified Distribution (State ID) does not match with any states entered in Box 15.

I have been unable to correct this error and, as a result, TurboTax 2024 will not allow me to file my federal tax electronically. 

[Durrell47]

Boxes 15, 16 and 17 are blank on my W-2, and I left the boxes 15-17 blank on my return in TurboTax. The final review will not accept no entry for Box 15 and will not let me file my federal return electronically. This is one of the main reasons that I purchased TurboTax 2024, but now I must mail my return. Very inconvenient!

[LindaS5247]

If there are no state taxes being withheld from your income reported on Form W-2, boxes 15 through 17 are usually left blank (empty) on the Form W-2.

To work around a blank state ID number, you can try to enter the Federal ID Number as a "replacement" for State ID number. The state ID number has no impact your tax return if it is blank on the W-2. 

If the field asks you for a state ID number in a specific "state require" format, such as "6 numbers followed by two letters"  you can enter a value that fits that format, in order to complete your return and e-file.