1099R and Distribution Code

[MS250]

I'm retired and receive a disability pension from my employer (I receive a 1099-R) each year. The distribution code listed in box 7 of my 1099-R is "3" (disability). I am under the minimum retirement age and the past several years TurboTax has put my Gross Distribution on Form 1040 in box 1 (wages, salaries, tips, etc) because I am under minimum retirement age. This year it is adding it to box 1H (other earned income) and telling me I cannot file electronically because there isn't taxable income.

The instructions on the back of the 1099-R says: ".... if you haven't reached minimum retirement age, report your disability payments on the line for Wages, Salaries, Tips, etc, on Form 1040....."

IRS explanation of form 1099-R box 7 says:

Code 3 is for a disability pension. If the taxpayer is under the minimum retirement age for the company he retired from, then check the box under Rollover or Disability that says "Check here to report as wages on Form 1040."

TurboTax does not offer this as an option and therefore my Gross Distribution amount is not being placed in the correct area on Form 1040.

[rjs]

The IRS changed Form 1040 this year. Line 1h is now the correct place for a disability pension when you are under the minimum retirement age. The IRS instructions for Form 1040 make this clear. Apparently the IRS neglected to update the instructions on the back of Form 1099-R to reflect the changes in Form 1040. On the new Form 1040 there is no line for "Wages, salaries, tips, etc."

Having zero taxable income on Form 1040 line 15 does not prevent electronic filing. What is the exact message that you get from TurboTax telling you that you can't file electronically? Please quote the entire message, word for word. When do you get that message? In Smart Check? When you try to e-file? Somewhere else?

Having the pension on line 1h is not what makes your taxable income zero. All the income on lines 1a through line 8, including line 1h, is added into your total income on line 9. Your taxable income on line 15 is being reduced to zero by adjustments or deductions, including your standard deduction.

Where exactly did you find what you quoted as the "IRS explanation of form 1099-R box 7"? I don't see that wording on Form 1099-R. The instructions that say "Check the box under Rollover or Disability that says 'Check here to report as wages on Form 1040'" sound like instructions for some tax software, not IRS instructions. But TurboTax has no such check box.

TurboTax for 2022 handles distribution code 3 a little differently than in past years. After you enter your 1099-R, as you proceed through the questions, it asks you what the youngest retirement age is for your pension plan. If your age is below the youngest retirement age it puts the pension income on line 1h.

[MS250]

Thank you for reviewing my message. I do have an amount on Form 1040 line 15 (taxable income). Everything looks to be correct when compared to previous years returns. When I select REVIEW tab, ANALYSIS shows my refund amount, then I select CONTINUE and SMART CHECK says it found errors. When I select FIX ERRORS I get the following message:

Your Federal Return Is Not Eligible for Electronic Filing
Why? Electronic filing identifies tax situations in your federal return that could preclude you from
filing electronically. Your federal return is not eligible for electronic filing due to the following
reason:
The tax withheld of $(Form 1040 Item 25D Federal Tax amount from 1099-R - Amount deleted for posting) as shown on Form 1040 is greater than or equal to $(line 2b Taxable Interest - Amount deleted for posting), the sum of income from the following sources:
Form 1040, line 1a - Total amount from Form(s) W-2, Box 1 ($0)
Form 1040, line 1c - Tip income not reported on line 1a ($0)
Form 1040, line 2b - Taxable Interest ($Amt deleted for posting)
Form 1040, line 3b - Total Ordinary Dividends ($0)
Form 1040, line 4b - IRA taxable amount ($0)
Form 1040, line 5b - Pensions and annuities taxable amount ($0)
Schedule 1, line 7
- Unemployment Compensation ($0)
Form 1040, line 6a - Social Security Benefits ($0)
Schedule 1, line 9 - Other Income, less net of foreign exclusion ($0)
Schedule C, line 1 - Gross Receipts ($0)
These rules are set by the Internal Revenue Service Electronic Tax Administration.
To file your federal taxes by mail, select "File a Traditional Paper Return."

I spent a couple hours on the phone with a TurboTax representative and after they checked things over, was told I could not file electronically because I have a 1099-R. This made no sense as I have been filing electronically for years with a 1099-R.

I even deleted the Taxable Interest Amount (from my 1099-INT) and received the same message but this time it  said my Federal Tax withheld was greater than or equal to ZERO.

I've tried a few other free e-file options recommended by the IRS to see where my 1099-R amount is placed on Form 1040 and each one seems to put it in a different place. However, I don't get an error telling me I can't e-file.

I've deleted my TurboTax file and redone my taxes a couple times now using the guided EasyStep with the same resulting error stating I can't file electronically.

Thank you

[MS250]

Thank you for reviewing my message. I do have an amount on Form 1040 line 15 (taxable income). Everything looks to be correct when compared to previous years returns. When I select REVIEW tab, ANALYSIS shows my refund amount, then I select CONTINUE and SMART CHECK says it found errors. When I select FIX ERRORS I get the following message:

Your Federal Return Is Not Eligible for Electronic Filing
Why? Electronic filing identifies tax situations in your federal return that could preclude you from
filing electronically. Your federal return is not eligible for electronic filing due to the following
reason:
The tax withheld of $(Form 1040 Item 25D Federal Tax amount from 1099-R - Amount deleted for posting) as shown on Form 1040 is greater than or equal to $(line 2b Taxable Interest - Amount deleted for posting), the sum of income from the following sources:
Form 1040, line 1a - Total amount from Form(s) W-2, Box 1 ($0)
Form 1040, line 1c - Tip income not reported on line 1a ($0)
Form 1040, line 2b - Taxable Interest ($Amt deleted for posting)
Form 1040, line 3b - Total Ordinary Dividends ($0)
Form 1040, line 4b - IRA taxable amount ($0)
Form 1040, line 5b - Pensions and annuities taxable amount ($0)
Schedule 1, line 7
- Unemployment Compensation ($0)
Form 1040, line 6a - Social Security Benefits ($0)
Schedule 1, line 9 - Other Income, less net of foreign exclusion ($0)
Schedule C, line 1 - Gross Receipts ($0)
These rules are set by the Internal Revenue Service Electronic Tax Administration.
To file your federal taxes by mail, select "File a Traditional Paper Return."

I spent a couple hours on the phone with a TurboTax representative and after they checked things over, was told I could not file electronically because I have a 1099-R. This made no sense as I have been filing electronically for years with a 1099-R.

I even deleted the Taxable Interest Amount (from my 1099-INT) and received the same message but this time it  said my Federal Tax withheld was greater than or equal to ZERO.

I've tried a few other free e-file options recommended by the IRS to see where my 1099-R amount is placed on Form 1040 and each one seems to put it in a different place. However, I don't get an error telling me I can't e-file.

I've deleted my TurboTax file and redone my taxes a couple times now using the guided EasyStep with the same resulting error stating I can't file electronically.

Thank you

[DaveF1006]

To clarify, what Turbo Tax product are you using?

@MS250 

[MS250]

Hello,

I'm using the desktop version of TurboTax Deluxe 2023.

@DaveF1006 

[AliciaP1 · Accepted solution]

This is an IRS system e-filing issue that they are aware of and working on.  You can see Known Issues and Solutions to monitor when there are updates.  Your other option is to print and mail your paper return to file now.

@MS250

[MS250]

Thank you for the information! I'll keep checking back to see when this issue is resolved.

@AliciaP1