I have Police Disability pension for 23 years, totally non taxable and also Social Security Disability for 20 years, non taxable, but Turbo Tax can't seem to detect this

[dangreisen]

Have had this same issue with HR Block too. Why can't either program just ask if this is disability income??

[DoninGA]

Pension income reported on a Form 1099-R is taxable on a federal tax return.

Social Security benefits, be they Survivor, Disability or Retirement reported on a SSA-1099 may be taxable on a federal tax return.

To enter, edit or delete a form 1099-R -

Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Scroll down to Retirement Plans and Social Security
On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button

Or enter 1099-r in the Search box located in the upper right of the program screen. Click on Jump to 1099-R

On the screen Did you get a 1099-R in 2023? Click on Yes

On the next screen click on Continue

On the screen Let's import your tax info Click on Change how I enter my form

On the screen How do you want to add your 1099‑R? Click on Type it in myself

On the screen Who gave you a 1099-R? select the type of 1099-R you received and Continue

To enter Social Security benefits reported on form SSA-1099

Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Scroll down to Retirement Plans and Social Security
On Social Security (SSA-1099, RRB-1099), click the start or update button

Or enter ssa-1099 in the Search box located in the upper right of the program screen. Click on Jump to ssa-1099

Up to 85% of Social Security Retirement/Disability/Survivors benefits becomes taxable when all your other income plus 1/2 your social security reaches:

• Married Filing Jointly - $32,000
• Single or Head of Household - $25,000
• Married Filing Separately - 0

[dangreisen]

Well Don, you are wrong. Please look at United States Court of Appeals for the Ninth Circuit; James A. Picard v; Commissioner Of Internal Revenue,

"The Ninth Circuit, reversing a Tax Court decision, has held that a policeman's reduced disability retirement benefits were excludable from income under section 104(a)(1), because the benefits were not determined by reference to his length of service."

Seems like every year that I actually have to file, since 2000, I've had to present this case law to some IRS Agent or 'Tax Professional" to show that all 1099R reported incomes are not Taxable.

I just can't figure out why these "Pros" at Turbo Tax and HR Block can't seem to figure a way to distinguish between these on their tax programs. 

[DoninGA]

@dangreisen What is the code in box 7 of the Form 1099-R?

[DoninGA]

@dangreisen I read the case you presented.

Since I am not familiar with this particular case, I can only equate this to Veterans Disability payments and retirement payments.  VA disability payments are not reported on a tax return nor on any type of federal tax forms.  However, a disabled veteran can receive military retirement payments which are reported on a Form 1099-R and are taxable on a federal tax return.

So on the Form 1099-R you received, the payer is reporting your disability payments only on the 1099-R or is this a combination of disability pay and retirement pay.  If disability payments which are to be excluded from income, why is the payer even entering those payments on a Form 1099-R?

I am going to page the most knowledgeable volunteer in this forum when it comes to retirement income issues for assistance.

@dmertz Could you please assist with this unique issue?

[dangreisen]

The Box 7 on my 1099R has 3 in it. This is not Military or VA disability. I was a State Trooper who was totally disabled in the line of duty after only 10 years of service.

Have had to deal with this tax issue on several occasions over the last twenty years and have always been told," sorry, our mistake" by tax pros or Revenue Agents.

[DoninGA]

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@dangreisen wrote:

The Box 7 on my 1099R has 3 in it. This is not Military or VA disability. I was a State Trooper who was totally disabled in the line of duty after only 10 years of service.

Have had to deal with this tax issue on several occasions over the last twenty years and have always been told," sorry, our mistake" by tax pros or Revenue Agents.

---

Understand.  And I am not disagreeing with you.  It is just outside my area of expertise on how this should be handled in the TurboTax program.

With a code of 3, meaning Disability, the program will enter your distribution from box 2a as Other Earned Income on the Form 1040 Line 1h if you have not yet reached minimum retirement age.

As a Viet Nam veteran myself, I can only give a heartfelt Thank You for Your Service.

Hopefully, our expert @dmertz will be able to resolve this issue.

[dmertz]

I don't have any specific knowledge in this area, but it seems to me that if it was nontaxable it should either not be reported by the payer on a Form 1099-R at all or should be reported on the Form 1099-R as nontaxable ($0 in box 2a).

[dangreisen]

My 1099R has a 3 in box 7 which indicates disability pay, box 2a is blank.

Just entered my 1099R information in the Tax Act program and all works perfect. Guess HR Block and Turbo Tax should figure out what Act is doing right!

Appreciate all the responses, unfortunately it seems the program is flawed.

[DoninGA]

Since box 2a is blank and you have answered the questions following entry of the Form 1099-R, on your Form 1040 Line 1h there should be a 0 entered.  None of your income from the Form 1099-R is taxable.