I'm not actually sure that's correct. Disability payments you earned from working would be taxable if you did not pay the premiums yourself out of pocket. In other words, if you paid the premiums with pre-tax deductions, or your employer paid the premiums tax-free to you, then it should be taxable income. For the first year of disability, it is considered earned income subject to social security and medicare tax, then from the second year onward, it is unearned income and you don't pay social security or medicare tax but you do pay income tax.
It might be tax-free for New York State income tax purposes, if they passed a special law exempting state employee benefits from state tax, but I believe it will still be taxable federal income.
I would need to see citations from the tax law to be proven otherwise.
I was told the exact same thing from NYSLRS. In years past I did receive a 1099-R indicating no federal taxes withheld. Do not know why they no longer send out a 1099-R?
According to Turbo Tax in it's help article, after you reach the minimum retirement age, your taxable disability pension is treated as a pension and doesn't count as earned income thus NYS is correct.
It was taxable in the past but no longer since you reached the minimum retirement age.
@Stacks21 wrote:
I was told the exact same thing from NYSLRS. In years past I did receive a 1099-R indicating no federal taxes withheld. Do not know why they no longer send out a 1099-R?
If you have anything that is counted as a pension, you should get a 1099-R. Maybe it is online and you need to download it. Your New York State pension is still fully taxable to the federal government (IRS) and must be reported on your federal tax return. NYS pensions are tax-free on your New York State tax return, along with the first $20,000 of any non-NYS retirement income (such as a pension from a private company, 401k or IRA). But you must enter the 1099-R for federal taxes and turbotax will do the state adjustment for you.
In my case I am receiving an accidental disability retirement from the NYS Police and Fire retirement system. It is exempt from federal taxes. As with all public pensions in NYS they are exempt from State and NYC/Yonkers tax. This is the first year I have not received a 1099-R. I called NYSLRS and they stated they are no longer sending out 1099-R’s for tax exempt disability pensions.
@Stacks21 wrote:
In my case I am receiving an accidental disability retirement from the NYS Police and Fire retirement system. It is exempt from federal taxes. As with all public pensions in NYS they are exempt from State and NYC/Yonkers tax. This is the first year I have not received a 1099-R. I called NYSLRS and they stated they are no longer sending out 1099-R’s for tax exempt disability pensions.
That makes sense then. I'm not aware of tax-free disability pensions but I'll take your word for it. Because New York is generally a "conforming state", anything that is not federal taxable income is almost always non-taxable in NY even before considering NY's special rules for state pensions.