Can I correct the taxable amt of my pension on the state return? 1099R says UNKNOWN. Simplified method is used, but the state shows only the total amount.

[patzoo]

This is only a problem with state.  They bring over the gross distribution for both gross and taxable amounts.  I need it to subtract some for the taxable portion.  Not the first year this has not worked for Arkansas.

[ReneeM7122]

Yes, you can correct the taxable amount of your pension on the state return.  

To get the State pension deduction, you will first have to enter the necessary information in your Federal Income tax return and then in the State income tax return.

Here are the steps to enter your exempt State employee pension:

On the  Federal Income Tax  portion:

1. In the search or find box, type in 1099-R
2. Click on Jump to 1099-R
3. Scroll down to Retirement Plans and Social Security
4. At IRA,401(k), Pension Plan Withdrawals (1099-R), click Start (or Update)
5. Enter your 1099-R or if you have entered it, click on Edit then Continue
6. Answer the next questions until you get to the Where Is This Distribution From? screen
7. Select the source State Employees and enter the information requested:
8. Click on Continue
9. Click on From a Qualified Plan
10. Continue answering the questions

On the State return portion: 

1. At the Changes to Federal Income page, scroll down to Received retirement income, click Start (or Update)
2. At the Retirement Distributions Summary page, click on Edit State
3. If no additional information is required, click on Continue
4. Click on Done

Here is a TurboTax article about retirement.

[patzoo]

It is NOT an exempt state employee pension.  It is a federal employee pension with the taxable amount showing unknown.  I KNOW what the taxable amount is, but it is not on the 1099, you have to go through the simplified method worksheet to figure it out.  The state return puts the gross distribution for the taxable amount.  That is what I need to change.

[BillM223]

I ran a test for Arkansas with a simple pension and some made up numbers to force the Simplified Method to reduce the taxable amount on the federal return. (i.e., a $10,000 gross distribution showed only $9,714 as taxable).

The $9,714 taxable amount appeared on line 5b on the 1040 (line 5a had the $10,000).

I indicated that this pension was "Employer-sponsored pension plan or qualified IRA" to make it eligible for the $6,000 Arkansas exemption.

This gave me a gross distribution of $10,000 and a Taxable amount of $9,714 on line 18A on the AR1000F, as a result of $3,714 when the $6,000 exemption is factored in.

Based on your comments, I am pretty sure that this is not what you got. So please tell me what you entered on the 1099-R - especially box 2a - and what you checked as to the type of pension, and what you got on line 18A on your AR1000F.

[patzoo]

1040 Line 5a and 5b had the correct amounts.  AR 1000F line 18 had the correct gross distribution but put the same amount for taxable amount.  Then it took off the $6000 exemption. 

It doesn't make a lot of difference in the tax, but I am unwilling to e-file a return with the wrong numbers.  I have had this problem before and had to send Arkansas a paper return so that I could force it to be correct.  I input the 1099R with 2a left blank and checked the Employer-sponsored pension box.  One year I found the incorrect taxable amount on some TT worksheet buried in the federal return, but the actual federal return was OK and only the state return was wrong.  I haven't found if that is the case this year, so will try to check this again.

[patzoo]

Federal Form 1099R Summary has my gross distribution amount on Line 26 with SM written next to it.  Then it lists the taxable amount on Line 32.  The Arkansas Retirement Exclusion Worksheet, Income Allocation Worksheet, and Pensions and Annuity Worksheet all use only the gross distribution amount.  

[BillM223]

"Federal Form 1099R Summary has my gross distribution amount on Line 26 with SM written next to it.  Then it lists the taxable amount on Line 32."

May I assume that line 29 had the nontaxable amount that was calculated from the Simplified Method?

OK, on the Arkansas Retirement Exclusion Worksheet, what is on line 1d? This should be the taxable amount, not the gross distribution.

On the same worksheet, what are the amounts for 1a, 1b, 1c, 1d, 1e, what box is checked after 1e, and 1f?

Going back to the Step-by-Step mode, did you see a screen with the title "Pension, 401K or Annuity Distributions"? On the next screen, did you check off "Employer sponsored pension plan"? And on the next screen, did TurboTax present the Taxable Arkansas Pension and which amount was it, the gross or the taxable? 

When you reply, please add @ BillM223 (without the space in between) so that I will be notified of your post. Thanks.

[patzoo]

@BillM223 Your assumptions about my Fed. 1099R Summary are correct. Line 29 does have the correct nontaxable amt from the simplified method.

For the AR Retirement Exclusion Worksheet, the problem is actually with the spouse amounts.  Lines 2a, 2c and 2d all have the gross distribution amount.  2b is 0, 2e is 6,000 with box NO checked.  Line 2f is the gross distribution amount minus the 6,000.  That is where I think it should be the taxable distribution minus 6,000, which must be caused by Line 2d being wrong.

I went through the Step by Step (this is on TTonline) where I enter the CSA-1099-R details and the next screen I checked that it was from an employer-sponsored pension plan.  I don't see anywhere it gives the Taxable Arkansas Pension amount.  It is just the one 1099-R screen and only asks about Arkansas tax withheld.  

[BillM223]

I have tried a number of different ways but I cannot reproduce what you are describing. 

I'm going to need your help to get more information. Please send me a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

***Online Product***

1. Sign into your online account.
2. Locate the Tax Tools on the left hand side of the screen.
3. A Drop down will appear. Click on Share my file with agent.
4. This will generate a message that a diagnostic copy will be created. Click on OK, the tax file gets sanitized and transmitted to us.
5. Please provide the Token Number that was generated onto a response to this thread.

***Desktop Product***

1. Click into your return.
2. Click Online and select "Send Tax File to Agent".
3. This will generate a message that a diagnostic copy will be created. Click on OK, the tax file gets sanitized and transmitted to us.
4. Please provide the Token Number that was generated onto a response to this thread.

Finally, please add @ BillM223 as you did before so I will be notified.

[patzoo]

@BillM223  Token number 789254

Thank you for your help.

[BillM223]

@patzoo

I see the issue - because the distribution code on the spouse's CSA-1099-R is 3 (disability) instead of 7 (normal), the Arkansas Retirement Exclusion worksheet is using the gross distribution for 2a, 2c, and 2d.

If you change the distribution code to 7, then 2a and 2c are the gross (as they should be), and 2d is the taxable amount, as determined by the Simplified Method and reported on the 1040.

The Arkansas Instructions for line 18a and 18b are confusing. Line 18a specifically states that you should start with the taxable amount, which is either line 2a or what was determined by the Simplified Method.

But the instructions for 18b do not state this. They state, "You are eligible for the $6,000 exemption for retirement or disability benefits provided the distribution was from public or private employment-related retirement systems, plans, or programs." The literal reading is that the $6,000 is removed from the gross amount, not the taxable amount (because it says "retirement benefits" and not "taxable benefits" like for line 18a).

So, you get what you expect if the distribution code is 7 but not if it is 3. I do not know yet if this is correct.

You asked what you could do besides printing and changing your return.

The amount of cost being recovered in 2020 is $236 (you can see this if you toggle the distribution code). If you wish to leave the distribution code as 3 (so the IRS won't wonder why you changed it), you can still get TurboTax to report the correct state income.

To "fix" your return in TurboTax (if you choose to do this, as I said, I do not know yet which way is correct), you will have to use an override in Forms mode (if you have the CD/download software).

1. Go to form AR1000F

2. on line 22, click on QuickZoom button

3. This will open form AR-OI

4. On line 13 column B, right-mouse click on this field and click on Override

5. Enter 236 (the amount of cost that is getting taxed) into this box

6. If you want, in the line 13 worksheet just below, enter "return of cost on CSA-1099-R" for description and enter 236 in column B

7. When you entered the override on line 13, this should have automatically updated lines 14, 15 and line 22 back on the AR1000F, reducing your state taxable income by $236.

OK?

[patzoo]

So since I am using the online version, there is no way to override this?  The spouse distribution code on the 1099R is and always has been 3.  Retired on disability but now past the minimum retirement age.  Somehow this worked fine in 2019, but in 2018 I had the same problem.  In 2018, the federal worksheet Distributions from Pensions, IRAs, etc. left line 2a Taxable amount blank and then carried over the gross distribution amount to the Arkansas Pension and Annuity Worksheet as both the gross and the taxable amount.  That is what TT is doing again in 2020.

In 2019, the federal worksheet Distributions from Pensions, IRAs, etc. line 2a Taxable amount was NOT blank and had the correct taxable distribution amount.   Line 18B of the Arkansas return listed correct amounts for gross and taxable amount, then subtracted $6,000 for the final amount in column B.

It looks to me like TT has put back in the programming error that caused this to be handled incorrectly in 2018 and was fixed for 2019.  Am I wrong?  

[patzoo]

@BillM223 

[BillM223 · Accepted solution]

"So since I am using the online version, there is no way to override this?"

Correct. I have looked at the Arkansas interview and do not see a way to put a random adjustment into the state return (this is one way we "adjust" the state taxable income in other states). Unfortunately, all the adjustments that I see are for particular situations, and might cause more trouble than it is worth to try it.

"In 2019, the federal worksheet Distributions from Pensions, IRAs, etc. line 2a Taxable amount was NOT blank and had the correct taxable distribution amount. "

I have programmed for 30+ years, and a change of input can certainly cause a change in output, even if one result is not correct.

"It looks to me like TT has put back in the programming error that caused this to be handled incorrectly in 2018 and was fixed for 2019.  Am I wrong?  "

I have no way to know this. I am not part of the Development Team at TurboTax.

Thank you for the token. I have packaged up the token with a description of the problem and have submitted it upstream. However, given the fact that Congress, the IRS, and the states are "moving the goalposts" on almost a daily basis causing a huge amount of work that shouldn't have been necessary in a normal year, it is not likely that this issue will be addressed in the short run.

So you have three choices that I see:

• File as-is and eat the small extra tax.
• Print the return, manually edit the numbers on the Arkansas form(s), and mail the state return with a copy of the federal (NOTE: since your State And Local Taxes are capped at $10,000 on Schedule A, changing your Arkansas return will not change your federal return).
• Buy a copy of the CD/download software and transfer your online tax file to it where you can override the number in doubt (in case I did not note this before, this will likely invalidate the Tax Accuracy Guarantee).

I am sorry I don't have better options for you. Thanks for your co-operation.

[joycepat2004]

1099R 2a  409.  AR line 16  409.

AR 18A shows qualified IRA  does this help?