pbgc pension federal taxable

[lynbou1]

Why does my pbgc pension shows in TT as not taxable in 2021 on 1040 line 5a buttnow as taxable in 2022 on form 1040 line 5b?

[JamesG1]

The pension was reported on the 2021 Federal 1040 tax return only on line 5a.  This tells me that the pension was reported on IRS Form 1099-R and only reported a value in box 1.

The pension is reported on the 2022 Federal 1040 tax return on line 5b because there is a value in box 1 and box 2a.

Is that what you are seeing on the paperwork?

[Edited 2/8/2023 | 2:00 pm PST]

@lynbou1

[lynbou1]

HI,  There's only a value in box 1 nothing in box 2.

[lynbou1]

If I put 0.00 in 2a it shows as non taxable

[JamesG1]

You are saying that the 2021 1099-R had a value in box 1 and nothing in box 2a?

Was 2021 the first year that you received this distribution from pbgc?

What are the distribution codes in box 7 on each year's 1099-R?

The value in box 2a is the taxable amount.  Perhaps, in 2021, you needed to compute a box 2a amount with a simplified method computation.

@lynbou1 

[lynbou1]

HI,

This is actually my husbands PBGC pension from US Steel.  He has been receiving this since 2010.  Every year there is no amount in 2a and box 7 has a 7 in it.  Also 2b is checked.  When I looked back on TT I put 0.00 in 2a  for 2020 and 2021 but I don't believe I did in previous years.  (2017 show as taxable on 1040) Every year this messes me up, I am just not sure if this is federal taxable income.  I know it is for state of Mich., not sure about fed.  I may have messed up for 20 and 21?  I appreciate any and all your help with this!

[lynbou1]

Hi I found this in TT 

"FORM 1099-R, BOX 2a: TAXABLE AMOUNT

Generally, the amount shown in box 2a is the amount of the distribution that is taxable. However, if the payer is unable to reasonably obtain the data necessary to compute the taxable amount, this box may be blank and the "Taxable amount not determined" box in box 2b will be checked. For pensions and annuities, if the "Taxable amount not determined" box in box 2b is checked, the gross amount of the distribution in box 1 will be used as the taxable amount if box 2a is blank."

So do you think I should amend 2020 and 2021?

[JamesG1]

Do either the 2021 or 2022 1099-R's include a value in box 5 Employee contributions?

Do either the 2021 or 2022 1099-R's include Taxable amount not determined checked in box 2b?

You may have needed to perform a simplified method computation for a prior year.  If so, someone here will be able to give you directions.

@lynbou1 

[ThomasM125]

Most likely, the pension benefits listed in box 1 are taxable. The only reason they would not be taxable is if the income used to make the contributions to the pension plan was taxed already and you didn't deduct the contibutions from your taxable income. Also, it is possible that only some of contributions were not deducted, as mention by @JamesG1. So, you probably need to amend your return to report the taxable income.

[lynbou1]

Thanks, that's what I figured

[lynbou1]

Hi both those years do not have anything in box 5, and have the box checked in 2b taxable amount not determined

[JamesG1]

TurboTax Online will use the simplified method to determine the taxable portion for box 2a of your 1099-R.   Presume that:

• Monthly payments were received,  
• Payments started in 2022 (more about this later), and 
• That box 7 is code 7.

You will need to know:

• The amount of the employee contributions (should be in box 5),
• The date the annuity started,
• The number of months that payments were received in 2022, 
• The age of the recipient when the annuity started,
• The age of other beneficiaries (if there are any), and 
• Was the recipient under the retirement age for the plan.

Follow these steps:

• At the screen Who gave you a 1099-R, select Financial Institution or other provider (1099-R).
• At the screen Any Periodic Payments? select Yes, got regular payments from this retirement account.
• At the screen Payment Start Year select Yes started getting payments in 2022.
• At the screen Let’s figure Out How Much is Taxable, select I need to figure out how much of this money is taxable.
• At the screen Enter Annuity Information enter required information.  Plan Cost should be in box 5.
• At the screen Enter Ages enter required information.

View Federal 1040 tax return line 5a and 5b at Tax Tools / Tools / View Tax Summary / Preview my 1040.

Entering the Payment Start Year as 2022 will give you an answer for a taxable amount.  The taxable amount is likely to change if you go back and report income for previous years because you will be reporting a Tax-Free Amount Previously Recovered.

However, you may want to think about:

• whether you need to amend prior year tax returns, 
• whether you are going to amend prior year tax returns, 
• who will amend prior year tax returns, and 
• how many years you would go back in amending tax returns.  

You would be amending state and Federal tax returns.  

You may want to reach out to a local professional for assistance.

A lot to think about.  Best wishes.

@lynbou1 

[lynbou1]

Thank you for your help!