OPM Pension taxable amount

[ijerrie]

I receive an OPM pension and there are different figures in the gross distribution and the taxable amount. This is due to the amount of my pension received deducts a certain amount each year which was part of my employee contributions.  When turbo tax is computing my tax, it is not using the taxable amount which is lower. Why?

[BillM223]

Go back to the 1099-R interview and do this:

Enter the 1099-R, including box 2a.

Skip through the next screens until you are asked if this is a qualified plan. Enter that it is qualified plan (but see this OPM page).

On the screen that asks about periodic payments, answer "yes" (this was not a one-time payment, was it?).

Answer "yes" or "no" on the next screen, depending on whether you started the pension this year or not.

On the next screen, if you answered "no", it will ask you if the amount in box 2a was used as the taxable amount - answer "yes", if that is the amount of the distribution less the basis. (remember the return of basis is spread out over the life of the pension). 

If the next screen is because you answered "yes" to the first year question, then probably the box 2a amount has been entered in "I will specify an amount". If not, then put the box 2a amount there.

Look at your 1040 - the box 1 amount on your 1099-R will be in line 4c, while the box 2a amount will be in line 4d.

Note that there may be other pension amounts which are included in these lines.

[warren_compton]

Box 2a on my 1099-R contains the text "UNKNOWN"

I used 1040-SR on TT and it places my correct income on Box 4c, but 0.00 for taxable income in Box 4d

I cashed out of the minimum required distribution for a thrift fund at age 70.5 years and so RMD section was not included.  This also results in a zero income tax for my California return according to TT.

Too good to be true?

[LindaB1993]

You are correct that an adjustment is necessary.  I recommend revisiting the input of the Form 1099-R.  There are a series of questions that will prompt the calculation of the taxable amount.

• Describe the taxable amount. 
• Was the amount shown in the taxable annuity box the taxable amount?
• The answer should be "No, a different amount was taxable.
• Then it will ask for the taxable method.. "It defaults to the Simplified method"
• Then when you enter the starting date, plan cost, etc, the program determines the amount that is tax free and taxable.

If your annuity starting date was between July 1, 1986, and November 19, 1996, you were able to elect to use the Simplified Method or the General Rule. This choice is irrevocable and applied to all later annuity payments.

The following are qualified plans.

• A qualified employee plan.

• A qualified employee annuity.

• A tax-sheltered annuity (TSA) plan or contract.

For more detailed information, please review IRS Pub.939

https://www.irs.gov/publications/p939

[tu513exf]

My situation is similar, except that OPM shows "UNKNOWN" in box 2a., probably because my ex-wife is receiving a portion of my total pension.  Turbotax shows that I used the Simplified Method to determine the taxable amount last year (a fixed amount each year less than the gross amout), but when I entered an amount lower than the gross distribution to me (in box 1) in box 2a.,  I happened to notice that my refund amount did not decrease when I entered the lower taxable amount, and the gross amount continued to appear in the summary.  I looked back at last year's return, and it did not reduce the gross amount that year, either.  So how do I get Turbotax to use the taxable amount that is the result of the Simplified Method?  I know what amount should be non-taxable each year, but I can't make that amount recognized.

[ReneeM7122]

To get TurboTax to use the taxable amount that is the result of the Simplified Method, you should go back and EDIT your 1099R in your Federal return. Answer or repeat the questions until you get to:

Verify Box 2a and Box 2b: Taxable Amount Not Determined 

Describe the Taxable amount: No, a different amount was taxable.

Tell Us the Taxable Amount Method: Simplified method or General rule

For more information about the Simplified Method, visit IRS Topic No. 411- Pensions 

The Simplified Method

Generally, if you begin receiving annuity payments from a qualified retirement plan, you use the Simplified Method to figure the tax-free part of the payments. A qualified retirement plan is a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract (refer to Publication 575 for definitions). Under the Simplified Method, you figure the taxable and tax-free parts of your annuity payments by completing the Simplified Method Worksheet in the Instructions for Form 1040 and Form 1040-SR or in Publication 575. For more information on the Simplified Method, refer to Publication 575, or if you receive United States Civil Service retirement benefits, refer to Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits.

@tu513exf

[ReneeM7122]

To get TurboTax to use the taxable amount that is the result of the Simplified Method, you should go back and EDIT your 1099R in your Federal return. Answer or repeat the questions until you get to:

Verify Box 2a and Box 2b: Taxable Amount Not Determined 

Describe the Taxable amount: No, a different amount was taxable.

Tell Us the Taxable Amount Method: Simplified method or General rule

For more information about the Simplified Method, visit IRS Topic No. 411- Pensions 

The Simplified Method

Generally, if you begin receiving annuity payments from a qualified retirement plan, you use the Simplified Method to figure the tax-free part of the payments. A qualified retirement plan is a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract (refer to Publication 575 for definitions). Under the Simplified Method, you figure the taxable and tax-free parts of your annuity payments by completing the Simplified Method Worksheet in the Instructions for Form 1040 and Form 1040-SR or in Publication 575. For more information on the Simplified Method, refer to Publication 575, or if you receive United States Civil Service retirement benefits, refer to Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits.

@tu513exf

[ReneeM7122]

To get TurboTax to use the taxable amount that is the result of the Simplified Method, you should go back and EDIT your 1099R in your Federal return. Answer or repeat the questions until you get to:

Verify Box 2a and Box 2b: Taxable Amount Not Determined 

Describe the Taxable amount: No, a different amount was taxable.

Tell Us the Taxable Amount Method: Simplified method or General rule

For more information about the Simplified Method, visit IRS Topic No. 411- Pensions 

@tu513exf

[hawkinsminor]

I'm confused: the statement below is from IRA publication 939

If your annuity starting date was between July 1, 1986, and November 19, 1996, you were able to elect to use the Simplified Method or the General Rule. This choice is irrevocable and applied to all later annuity payments.

The following are qualified plans.

• A qualified employee plan.

• A qualified employee annuity.

• A tax-sheltered annuity (TSA) plan or contract.

Simplified Method.

 

If you receive pension or annuity payments from a qualified plan and you aren't required to use the General Rule, you must use the Simplified Method to determine the tax-free part of each annuity payment. This method is described in Pub. 575.

Also, if, at the time the annuity payments began, you were at least age 75 and were entitled to annuity payments from a qualified plan with fewer than 5 years of guaranteed payments, you must use the Simplified Method.

My dad retired in December 1985 at age 54 received 1st payment January 1986 age 54. It's not excepting his age using the simplified method.  OPM pension is a qualified plan. What method do I use?

[BillM223]

Sorry, we see so few pensions that are that old, this does not jump to mind.

For your dad, we need to go to Pub 575: "Qualified plan annuity starting before November 19, 1996.

If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract)) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the 3-year Rule. If you used the 3-year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable."

So, your dad should use the General Rule, unless his annuity qualified for the 3-year rule.

I believe (having never seen one of these) that under the 3-year rule, distributions are not taxable until the total amount that you have contributed has been distributed back to the taxpayer (after that, it is all taxable). Another IRS webpage helpfully said, "If the taxpayer used the 3-year rule, the annuity is fully taxable. If they used the general rule, refer the taxpayer to a professional tax preparer."

In other words, take all the old tax returns and papers to a tax preparer to try to figure out how much of the cost or basis (after-tax dollars contributed to the annuity while he was still working) has already been paid out.

I suspect that no mater what, all of the distribution will be taxable.

[RobertRummel]

Really frustrating... REALLY frustrating, REALLY FRUSTRATING.  I wasn't sure whether to check 'simplified" or "General" method on my 1099 from OPM, so originally I checked 'simplified' and then found it was NOT simple, so I went back and changed it to "General", but now, whatever I do; when it comes up for review; the simplified

form is the one which keeps coming up in the window and It keeps asking for information I do NOT have.  I retired from civil service in 2007 and have been getting pension ever since.  PLEASE HELP.

[HopeS]

Since you are having issues with your Form 1099R, I suggest you delete the Form and re-enter it in the "Wage & Income" section of your return.

Follow these steps to delete your 1099-R in TurboTax.

1. Open (continue) your return if you don't already have it open.
2. Search for 1099-R and select the Jump to link in the search results.
3. This will take you to the Review your 1099-R info screen.
4. Select the trash can next to your 1099-R and then answer Yes.

Or, you can use the Tool feature to delete the Form instead:

1. Sign in to TurboTax and open or continue your return, if you haven't already.
2. Select Tax Tools from the left menu, then delete Form 1099R.
3. Answer Yes to confirm.

Before logging back into your account, clear your Cache to ensure no information is trapped. See the link below:

How to Clear Cache

@RobertRummel