I'm entering a 1099-R for military retirement pay/pension and I believe it is treating it like an early withdrawal, how do I fix this?

[NCperson]

@bloddyfloody1979 be sure to enter the form EXACTLY as it is presented to you.... what is in Box 7? 

why do you think it is being treated as an early withdrawal? 

[bloddyfloody1979]

Box 7 reflect the #7

it tells me that’s it’s accessing an early withdrawal penalty and give me options to try to lower it etc.

[VolvoGirl]

Are you under 59 1/2?  It should ask you a series of questions about it like if you are getting regular payments.

[NCperson]

@bloddyfloody1979 

a code 7 is a normal distribution - 

how old are you as of 12/31/21? 

[bloddyfloody1979]

43, but should be irrelevant, this normal military retirement pay

[bloddyfloody1979]

Yes but this isn’t TSP or anything just normal monthly pension, should be no penalties regardless of age

[NCperson]

@bloddyfloody1979 - it is relevant,... you have to answer the questions about whether this is a periodic payment (it is), otherwise payments received under the age of 59.5 is subject to 10% penalty.

[bloddyfloody1979]

It doesn’t give me those questions

[SweetieJean]

The questions re exceptions to the 10% penalty appear a little later, so just keep going.  Also be sure you didn't accidentally check off the IRA box (between boxes 7 and 8 on the 1099-R) when you did the data entry.

[bloddyfloody1979]

I see now where u can enter periodic payments, I entered the full amount and still refers to an extra tax bill of 10%

[SweetieJean]

Try entering the amount you receive each month (and indicate that such amount is monthly).  Also see this thread;

I entered a 1099R for military retirement pay. Why... (intuit.com)

[bloddyfloody1979]

Tried that too

[NCperson]

@bloddyfloody1979 - let's step back..... while you stated you 'beleive;' it is treating this as an early withdrawal, is it really?  

Look at Schedule 2 - is there any additional tax reflected related to this pension?  is there any tax on Line 8 of this form?  

[SteamTrain]

@bloddyfloody1979 

as indicated above by @NCperson   ....Schedule 2 line 8 is the best place to check....but Online software users can't see that until they pay for the software.

Another place to check is line 23 of your form 1040 (which you can see at any time).  If that is $0, then you are not being hit with the 10% penalty.  If line 23 of the form 1040 is some other $ amount, then you can't really know without looking at the schedule 2, since other taxes can also be added into that line.

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Remember that your Military pension is still taxed as income on your Federal tax return, but just shouldn't be hit with the extra 10% penalty (if box 7 contains code 7 AND you indicated it is a Non-Qualified pension in the follow-up page questions after the main page entries 

(states vary as to whether they tax military pensions).

Certainly in my desktop software, as long as the 1099-R (for a 41 year-old person & DFAS 1099-R) had box 7, code 7, and indicated it was non-qualified pension in the entries of the form....the desktop software does not hit it with 10% penalty.  I don't have a similar test setup in my Online software....so I can't check its "flow" and behavior without a lot of messing around.

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