PSO Deduction

[jwillin]

I am having a dilemma with the PSO insurance premiums.  The pension administrator paid for my medical health insurance. I also pay for additional medical insurance (cancer and heart policies) plus long-term care insurance.  For example, I received a letter from the pension administrator that the pension plan paid $1,700 for medical premiums (medical, dental, and vision) for 2023. I want to take the full exclusion of $3,000.

My question is, where can I place my additional premiums of $708 and the long-term insurance policy of $1588, especially since I do not have 7.5% of my AGI in medical expenses? Do I add the additional premiums to the $1700 and change the taxable income amount in the 1099-R? Or if I add the additional insurance premiums will the software do the calculations? Will it also reduce the amount of the long-term insurance to reflect the $3,000 exclusion?

The software only covers premiums made by the pension administrator, which is the $1700 amount, but it does not allow for the addition of the other premiums.  Although this question has been asked previously, the response was not clear.  Please advise.  Thanks.

[DawnC]

Don't make changes to tax forms, enter them exactly how you see them.    What state do you reside in and have you went through the state return yet?  

[jwillin]

I live in OH. No, I have not completed the state forms yet. 

[ThomasM125 · Accepted solution]

When you enter your Form 1099-R, if you don't check the "IRA" box, you will see a question on the next screen asking if you are a Public Safety Officer. When you indicate that you are, on the next screen you can indicate that the distribution included health insurance premiums. Then on the next screen you can enter the amount paid for your premiums to get the $3,000 exemption from tax for your pension plan distributions. Your only other option to exclude the benefits would be to add a negative adjustment to income.

You can make an adjusting entry to income as follows:

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the entry and the adjustment as a negative number

[jwillin]

Thanks, Thomas, I appreciate your follow-up to my question.  I didn't know I could adjust those numbers in the software. Thanks, again for your input. 

[BAB9027]

I am having the similar issue with entering proper PSO deductions.   My Pension administrator deducted $1775 from my pension for my "secondary" or supplemental health insurance.   I also pay for Medicare premiums which are deducted from by Social Security from my SS benefits.   During the 2023 year, Social Security was deducting payments for Part B Premiums for the first half of the year.  Then they stopped my SS benefits to audit my account and later in the year, SS paid my Medicare premiums by lump sum payment to Medicare.   On the SSA-1099-SM form, they have several line items, one for amount ($1589) deducted from my SS benefits and another line item for the Deductions for Other Adjustments  ($3,178.80, which is the lump sum payment for second half of year and to recover past due premiums they claim I owed).   In all, Social Security deducted $4767.80 from my SS benefits to pay Medicare for Part B Premiums.      

I have paid well above the $3,000 to meet the PSO full exclusion.   With the change in law in December 2022, I should be able to enter the Medicare payments toward the PSO exclusion.  There is a section to add the Medicare Part B Premiums deducted by SSA from my benefits.  However when I enter the $1589 amount, the 1040 form does not truly count this amount towards the PSO exclusion.   The other lump sum payment by Social Security for my Medicare health benefits is mute, because I would already reach the full exclusion with the $1775 Pension administrator deductions and the regular deductions totaling $1589 by SSA, which equals $3,364.

I have tried to go back to the Wages and Income section of TurboTax to edit the amount and nothing seems to flow properly down the line as I looked at subsequent pages of the return.    Have you figured out how to handle your PSO deductions without issue?    The responses I had read to your inquiry were not clear and I do not agree with entering numbers that do not correspond with the 1099 forms we receive.   I am sure other retirees are having this type of situation and TurboTax experts should be addressing this properly.       

[rkeeton88]

I understand your post and thanks.  However, the law changed in Dec. 2022 to also include a tax deduction on premiums paid by the retiree to the insurer not just those made directly to health insurance by the Administrator.  IRS 1040 Instructions page 28 show how to do this on paper.   On Line 5b, the retiree can enter the pension total minus the premiums paid by the retiree to the insurer.  Retiree is instructed to write "PSO" next to Line 5b.

Will Turbotax update the software to account for a tax deduction made by retirees to the insurer directly as allowed?

[DoninGA]

@rkeeton88 This has already been incorporated in the 2023 TurboTax software.  As indicated by the answer provided by @ThomasM125 at the start of this thread.

After you enter the Form 1099-R there will be a series of screens asking specific questions.  One of the screens will ask if you were a Public Safety Officer.  Answering Yes to this question you will come to another screen where you can enter the amount of health insurance premiums you paid, not to exceed $3,000.  The amount you enter will be deducted from the taxable amount of your pension on Line 5b of the Form 1040.  The software will enter PSO to the left of Line 5b.

[dmertz]

In TurboTax, when entering the Form 1099-R, you indicate that you were a PSO and you indicate that money from the distribution was used to pay for health insurance (no matter how the insurance premium was paid), TurboTax will present a box where you can enter the amount of premiums paid for the insurance, up to a maximum of $3,000.  This is as it has always been, no change to TurboTax needed.

[rkeeton88]

Thanks for the info.   My concern is the screenshots that @ThomasM125 posted:

1)Were you a public safety officer: yes

2)Did the pension administrator pay for health insurance:  no (that is my answer as I paid for them myself)

3)How much did your administrator pay directly to health insurance:  $0  (I paid, not the administrator)

Should I report the premiums I paid myself here even though that's not what the questions are asking or are there other screens?

[DoninGA]

@rkeeton88 

The question in the 2023 editions asks Did you or the Pension Administrator Pay for Health Insurance?

Since you did answer Yes.