I have a pension from a non-qualified plan. However, TurboTax keeps asking me to correct this error: Was This Distribution From a 403(b) Plan? My only choices are 1) Yes, or 2) No, it was from another qualified plan. Neither answer is correct.

[BillM223]

1. What was your distribution code?

2. Did you not see this page first?

It may be a matter of poor word choice in TurboTax, but I would need to see how you got to this question.

[dmertz]

@BillM223 , the developers have goofed this question in both the online and download versions of TurboTax for distributions from an inherited nonqualified annuity (code 4D).  The question makes no sense since code D indicates a distribution from neither a 403(b) nor any other type of qualified plan.

[dp001]

I just started seeing this issue today 3/6 after I reviewed my return to get ready to file it. It showed up in my "Your CompleteCheck™ to-do list".  The error didn't occur when I originally entered the 1099-R or when I reviewed my return on 3/4 . I hadn't made any changes to my return between the 3/4 and 3/6 reviews. So, I got to the question below via my "Your CompleteCheck™ to-do list". I also tried deleting the 1099-R today and reentering it (using the TurboTax image capture of the 1099-R). I'm now seeing the question below when entering the 1099-R.  The 1099-R is for a Non-Qualified Stretch Annuity I inherited (1099-R Box 7 is 4D).

Please post a solution or have the software development team fix this bug so I can file my taxes.

Was This Distribution From a 403(b) Plan?

- Please read below and take any necessary actions.

- The distribution rules are slightly different for 403(b) plans compared to other more common qualified retirement plans, like 401(k)s. (These plans are similar to 401(k) plans, but typically only offered by public schools and certain charities.)

Answer #1: Yes, this is a 403(b) plan

Answer #2: No, it's another type of qualified retirement plan

[BillM223]

@dmertz  as always, I am delighted that you are here to save everyone a lot of time in researching an issue that you have already identified.

@KJBeav 

@dp001 

This issue has already been reported for the use of distribution code 7D. Please see this TurboTax Support article. Please sign up for updates so that you will be notified of any fixes.

dmertz do you feel it is likely that the same issue happens for distribution codes of 7D and 4D (which you indicated)?

[dmertz]

Probably has the same cause, but I've seen cases with other bugs where the solution was not generalized and only corrected one of the related cases.  A case in point is the issue that was present last year where MAGI was being calculated incorrectly for the deduction for a traditional IRA contribution and for a Roth IRA contribution when there was also a distributions from an inherited IRA.  Only one of these MAGI calculations was corrected with an update, probably because the problem was not generalized properly:

https://ttlc.intuit.com/community/taxes/discussion/magi-calculation-for-roth-contribution/00/3205030

Given the developer's history of being shortsighted with respect to understanding the underlying cause of a problem, there's a good chance that the change to correct the 7D case will not correct the 4D case.  The fix needs to involve not asking the question if code D is present, but it would not surprise me if they apply the fix only to the case where both code D and code 7 are present. 

[dp001]

@BillM223, can the bug report for Why am I getting an error when entering Form 1099-R box 7 code 7D?  be updated to let the development team know they need to test and fix both the 7D and 4D use cases? 

[BillM223]

Yes. 

Since it's clear that the code D is the problem (Annuity payments from nonqualified annuities), I am sure they will look at 4D also.

[KJBeav]

Yes, it is a non-qualified plan, which I clearly checked.  I spent a couple of hours on a chat with multiple Support people, who were stumped.  I gather it's now in Level 3 Support, pending a solution.   One is code 7 and the other is code 7D.

[dmertz]

Another user who encountered this bug suggested omitting the code 7 and just entering the code D.  Seems like a reasonable workaround to me.

[bernie-polikowsky]

I am having the same problem with only the 7 code in box 7.  One 1099-R is for a non-qualified annuity and the other is for dividend payment on a life insurance policy.  TT insists that I pick one of the choices, 403(b) or "another qualified plan".  Neither of these choices is correct.  

[DoninGA]

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@bernie-polikowsky wrote:

I am having the same problem with only the 7 code in box 7.  One 1099-R is for a non-qualified annuity and the other is for dividend payment on a life insurance policy.  TT insists that I pick one of the choices, 403(b) or "another qualified plan".  Neither of these choices is correct.  

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This is a known problem when selecting a Non-Qualified Plan and using the TurboTax online editions.  This problem does not occur when using the desktop editions.

Problem has been reported to the TurboTax Moderators of this forum and we are waiting for a date when this will be corrected.

[KJBeav]

I decided to go ahead and e-file, even with the error.  TT let me e-file, and IRS accepted it, so we will see.

[b7e00183d6f5]

I still have this error when attempting to enter a 4D dist code.   When I ask turbo tax to follow this thread and get updates, it comes back with This issue has been resolved 2 weeks ago.   This is obviously not true as I had the error last week and also  2 minutes ago when I made several more attempts.  I shouldnt have to rig the system by entering in a 4 to attempt to bypass it.  Entering in a D doesnt work but a 4 does.   On the surface this appears a simple turbo tax correction so why is it taking weeks when people want to file now and not wait days or weeks for a correction?    This isnt complicated or am I wrong?

[dp001]

I was able to file my taxes with this outstanding request from turbo tax for additional information for my 1099-R with code 4D entered in Box 7. I entered the 1099-R exactly as I received it with code 4D in Box 7. When TT asked the question, "Was This Distribution From a 403(b) Plan?", I just used the TT menu system to exit the 1099-R data entry at this point by jumping back to the Enter Income section so I could continue working through the rest of my tax return. I was able to verify that the TT software processed this 1099-R distribution properly and included it in the “Taxable pension distributions” amount reported to the IRS on 1040-SR Line 5b. To see the Line 5b breakdown you need to review the TurboTax “Pensions/Annuities/IRAs Income Exclusion Worksheet", this worksheet is available when you print your tax return with TT worksheets.

I’m just providing this feedback as an alternative to some of the other suggested workarounds.

Since I'm not a Tax Expert, I just verified it was processed the same way TT processed it on my 2023 Tax Return when their software didn't have this software bug.