Box 7 is used to report income to you. The different codes within box 7 tell what the tax treatment of any distribution amounts should be. 7 is the code for Normal Distribution (which means it was distributed to taxpayer after age 59.5). D is the new 'nonqualified annuity distribution code'.
The taxable amount of the distribution should still be indicated in Box 2a based on the differing rules depending on when the annuity was purchased.
I have listed below, all of the possible codes that you could see on your 1099-R, just in case you have any follow up questions.
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When the Gross Distribution is $10852.25 and the Taxable Amount is 18.90 why does the taxable amount of my social security increase
A gross amount of $10,852.25 and a taxable amount of $18.90 indicates that the distribution consists of $10,833.35 of your original premiums being returned along with $18.90 of taxable earnings.
The calculation of the taxable amount of Social Security income depends on the amount of your other taxable income. It's not uncommon to see an increase in taxable Social Security income equal to 85% of the increase in your other income. In that case, an increase in regular income of $19 ($18.90 rounded up) would cause an increase in taxable Social Security income of $16.
In TurboTax I have to mark it as "7" or "D" what should I use for the 1099-R that is marked "7D" ?
TurboTax's 1099-R form has two box 7 drop-downs. Select "7" in one and "D" in the other.
I can't add the D in Block 7. Only 7. Now what do I do with the D?
The 2020 1099-R Block 7does not have a 2nd drop down block. There is only one block and the 7D is there. On turbo tax 2020, the 2nd line down has different codes. D is for Death. The D in block 7 on the 1099 now is for disability, which applies to me but the block on Turbo Tax will only take one character.
@Tethy-_1930 wrote:
The 2020 1099-R Block 7does not have a 2nd drop down block. There is only one block and the 7D is there. On turbo tax 2020, the 2nd line down has different codes. D is for Death. The D in block 7 on the 1099 now is for disability, which applies to me but the block on Turbo Tax will only take one character.
@Tethy-_1930 Are you using the online version of TurboTax?
Code "7" is a Normal Distribution, code "D" is for a non-qualified annuity. (Code "4" is for death. Code "3" is disability.)
You need to click "I have more than one code value in Box 7" directly below the box 7 input field. This will open up another input field to enter the D.
Code 7 indicate normal distribution so you will not have the 10% early withdrawal penalty on top of the normal income tax.