I do no have taxes taken out of my pension why am I being asked?

[mjgrevel]

How do I answer the questions about being taxed when I do not have taxes taxen out?

[BMcCalpin · Accepted solution]

Whether or not your pension is taxable is a totally different situation than whether or not you withhold tax. That is, you can still owe tax on a distribution from a pension, whether or not you withheld any tax to help pay for it.

If the taxable amount of your pension is not entered in box 2a, then TurboTax will have to go through a process (the Simplified method) to figure out how much of the distribution is taxable.

If you did not make any after-tax contributions to your pension while you worked (this amount is called the "cost" or "basis" of the pension or annuity), then normally 100% of the distribution would be taxable at the federal level. States are another issue as many of them exclude some or all pension income from taxation.