Pension Source

Forum|Forum|5 years ago
March 16, 2021
1 reply
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I receive 3 pensions and did not contribute to any of them. What code do I use for the source? They are not military or disabiity. Do I use the 3 year rule, the general rule or none?

ThomasM125

Level 15

The distribution code for the pension distributions would be listed in box 7 of your form 1099-R. Once you enter your distributions in TurboTax off of your form 1099-R, the program will ask you the pertinent questions to insure that the income is reported accurately on your tax return.

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MMiszAuthor

Level 2

I did enter code 7 for distribution for each of them but one of the follow up questions is "What is the source of the distribution? "If I select "none of the above", the pensions are taxable on my NJ return and if I check General Rule the pensions are excluded on my NJ return. I'm not sure how to answer this question. Thank you.

DMarkM1

Level 15

If your pension was contributory, generally, your personal contributions to your pension or annuity are taxed while you are still working. Because those contributions were taxed once, New Jersey will not tax them again. Therefore, you may exclude from income the part of a pension or annuity payment that represents contributions that already have been taxed.

However, any amount you receive in excess of your previously taxed contributions must be reported as taxable income. You must determine the taxable and excludable portions of payments you receive from a pension or annuity to which you have made contributions. You will use either the 3-year rule or General Rule as described in this link.

If that is the case this link has worksheets to determine whether the 3-year rule or General rule gives you the most tax benefit.

If your pension is non-contributory you would select "none".

Noncontributory plans do not require an employee to make contributions toward their retirement. Payments you receive from such a plan are fully taxable because you never paid tax on any of the funds in the plan. You will report on your return the total amount of pension or annuity income shown on your Form 1099-R.

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