I received a 1099-R for a life insurance death benefit payout. TurboTax used full distribution (box 1) versus taxable amount (2a)

[evaladehoff76]

I received a 1099-R for a life insurance death benefit payout. TurboTax used full distribution (box 1) versus taxable amount (2a). How do I get it to use only the taxable amount?

[dmertz]

It's doubtful that TurboTax is treating the entire amount as taxable.  If only the amount from box 2a is being included on Form 1040 line 5b, TurboTax is treating only the amount from box 2a as being taxable.  The only way I can think of to cause TurboTax to treat the entire amount as taxable is if you mistakenly marked the IRA/SEP/SIMPLE box on TurboTax's 1099-R form, causing the entire box 1 amount to be inappropriately included on Form 1040 line 4b.

Keep in mind that the tax code defines the entire box 1 amount as "income," but the nontaxable portion of that income has no effect on your tax return (other than being required to be shown on line 5a of Form 1040).  The nontaxable portion of the income should be present in box 5 of the Form 1099-R.

[evaladehoff76]

Thank you for the feedback!  I think this is indeed the issue "I mistakenly marked the IRA/SEP/SIMPLE box on TurboTax's 1099-R form, causing the entire box 1 amount to be inappropriately included on Form 1040 line 4b."
 However, it wasn't by mistake per se.  My confusion is there seems to be no correct answer at the point where I selected IRA/SEP/SIMPLE.  The Options were:
1) Financial institution or other provider (1099-R)

2) Office of Personnel Management (CSA 1099-R)
3) Office of Personnel Management (CSF 1099-R)
4) U.S. Railroad Retirement Board (RRB 1099-R)
The form only says 1099-R - So I was figuring selection #1 was the appropriate answer?  Are there more options to choose from?

[dmertz]

Yes, you would select 1099-R.

You must make sure that the marking (or not) of the IRA/SEP/SIMPLE box on TurboTax's 1099-R form matches that of the form provided by the payer.  Since an IRA is not permitted to contain life insurance, a Form 1099-R for a distribution from a life insurance policy cannot have the IRA/SEP/SIMPLE box marked.

[evaladehoff76]

Thanks again!  Option 1 is what I had selected, and the one that results in taxing the entire amount.  But based on your description that it should align with "NOT being an IRA" -  it seems like the 1099-R selection (Option 1) is NOT the one I should select, as it specifically calls out IRAs?  I've included the selections that TurboTax provides, along with the added description shown on the screen.

1) Financial institution or other provider (1099-R). Retirement plans like 401(k)s, IRAs, pensions, annuities, etc. (Most common)

2) Office of Personnel Management (CSA 1099-R). For U.S. Government Civil Service retiree annuity

3) Office of Personnel Management (CSF 1099-R). For U.S. Government Civil Service survivor annuity

4) U.S. Railroad Retirement Board (RRB 1099-R). For annuities or pensions

The deceased was not a government employee, so 2 & 3 don't seem to make sense.
And they didn't work for the Railroad.
The form itself only says 1099-R and the IRA/SEP/SIMPLE is not checked.

Any other insights are appreciated!  Thx!

[DianeW777]

Option 1 is the definite selection for your 1099-R. My advice is first to clear the cache and cookies, and if necessary to delete the 1099-R and then re-enter it. If you mistakenly checked that it was an IRA, then it may remember that in the background. 

You can try the following first to see if it makes a difference. Close your return and do the following:

Clear the cookies and cache.   It handles many issues that seem nonsensical on a regular basis with online activity. Watch to be sure you are selecting 'all time' as example.  Do not use selections like 'last hour' for those browsers that give  you options.

• How to clear your cache

Once this is complete open your return and try again.

If you are using TurboTax Desktop, save your return, then at the top select Online, then Check for updates.

Review your 1040 Form Lines 5a (Full amount in box 1 and 5b taxable amount

From the left rail menu in TurboTax Online, select Tax Tools (You may have to scroll down on the left rail menu.)

1. Select Tax Tools
2. On the drop-down select Tools
3. On the pop-up menu titled “Tools Center”, select View Tax Summary 
4. On the left sidebar, select Preview my 1040 

For TurboTax Desktop, change to 'Forms' and review the forms 

                       
If you see the correct entries you are ready to complete the return. If not, use the delete form instruction next, then re-enter your 1099-R.

Use the link below for your version of TurboTax to delete a form.

• If you're using TurboTax Online software and need to delete a form, click here.
• If you're using TurboTax Desktop software and need to delete a form, click here.
  • Where do I enter Form 1099-R?

@evaladehoff76