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Returning Member
posted Jul 13, 2022 5:10:34 PM

I'm entering a 1099-R for military retirement pay/pension and I believe it is treating it like an early withdrawal, how do I fix this?

0 16 2860
16 Replies
Level 15
Jul 13, 2022 5:53:17 PM

@bloddyfloody1979 be sure to enter the form EXACTLY as it is presented to you.... what is in Box 7? 

 

why do you think it is being treated as an early withdrawal? 

Returning Member
Jul 13, 2022 6:08:24 PM

Box 7 reflect the #7

 

it tells me that’s it’s accessing an early withdrawal penalty and give me options to try to lower it etc.

Level 15
Jul 13, 2022 6:10:35 PM

Are you under 59 1/2?  It should ask you a series of questions about it like if you are getting regular payments.

Level 15
Jul 13, 2022 6:24:01 PM

@bloddyfloody1979 

a code 7 is a normal distribution - 

how old are you as of 12/31/21? 

Returning Member
Jul 13, 2022 6:27:02 PM

43, but should be irrelevant, this normal military retirement pay

Returning Member
Jul 13, 2022 6:28:08 PM

Yes but this isn’t TSP or anything just normal monthly pension, should be no penalties regardless of age

Level 15
Jul 13, 2022 6:28:46 PM

@bloddyfloody1979 - it is relevant,... you have to answer the questions about whether this is a periodic payment (it is), otherwise payments received under the age of 59.5 is subject to 10% penalty.

Returning Member
Jul 13, 2022 6:44:56 PM

It doesn’t give me those questions

Level 15
Jul 13, 2022 6:56:22 PM

The questions re exceptions to the 10% penalty appear a little later, so just keep going.  Also be sure you didn't accidentally check off the IRA box (between boxes 7 and 8 on the 1099-R) when you did the data entry.

Returning Member
Jul 13, 2022 7:02:13 PM

I see now where u can enter periodic payments, I entered the full amount and still refers to an extra tax bill of 10%

Level 15
Jul 13, 2022 7:27:03 PM

Try entering the amount you receive each month (and indicate that such amount is monthly).  Also see this thread;

I entered a 1099R for military retirement pay. Why... (intuit.com)

Returning Member
Jul 13, 2022 7:48:04 PM

Tried that too

Level 15
Jul 14, 2022 5:31:32 AM

@bloddyfloody1979 - let's step back..... while you stated you 'beleive;' it is treating this as an early withdrawal, is it really?  

 

Look at Schedule 2 - is there any additional tax reflected related to this pension?  is there any tax on Line 8 of this form?  

Level 15
Jul 14, 2022 5:57:45 AM

@bloddyfloody1979 

 

as indicated above by @NCperson   ....Schedule 2 line 8 is the best place to check....but Online software users can't see that until they pay for the software.

 

Another place to check is line 23 of your form 1040 (which you can see at any time).  If that is $0, then you are not being hit with the 10% penalty.  If line 23 of the form 1040 is some other $ amount, then you can't really know without looking at the schedule 2, since other taxes can also be added into that line.

______________________

Remember that your Military pension is still taxed as income on your Federal tax return, but just shouldn't be hit with the extra 10% penalty (if box 7 contains code 7 AND you indicated it is a Non-Qualified pension in the follow-up page questions after the main page entries 

(states vary as to whether they tax military pensions).

 

Certainly in my desktop software, as long as the 1099-R (for a 41 year-old person & DFAS 1099-R) had box 7, code 7, and indicated it was non-qualified pension in the entries of the form....the desktop software does not hit it with 10% penalty.  I don't have a similar test setup in my Online software....so I can't check its "flow" and behavior without a lot of messing around.

_______________________

Level 15
Jul 14, 2022 6:04:49 AM

@bloddyfloody1979 

Also

You indicated you are using Online Deluxe LIVE......  That's an extra ~$60-65, but it does get you access to an actual live prep tax agent (we here in the community are not your LIVE agents).....and you could simply ask them to ensure, or show you that the 10% penalty is not being assessed.

 

If you are NOT going to be using a LIVE agent, then you can remove the LIVE part:

How do I remove TurboTax Live? (intuit.com)

 

Level 15
Jul 15, 2022 4:39:51 PM

Three things concerning a military retirement 1099-R

 - On the screen that asks if the IRA/SEP/SIMPLE box is checked, you must indicate no.

 - On the screen that asks if you were employed as a public safety officer, you must select no.

 - On the screen that asks if the payment was from a qualified or non-qualified plan, you must select that it's from a NON-Qualified plan.

The last one being incorrectly selected is the most common reason for a penalty to be assessed if you are not yet of retirement age.