Turbo Tax is taxing my retirement income for the state of Mississippi. By state law, this is not state taxable income. Is there a box I missed?

[dukes909]

That is crazy. At this point TT should be aware that they have a program error.  Either every year before this one was incorrect OR whatever change they made this is yes incorrect.  They can't both be incorrect or correct.

@SteveInMS 

[Dixiefire53]

It worked perfectly in H&R block.  I Chose option 2 and the software knew not to tax my retirement for Mississippi.  My taxes are filed!  I still prefer TT over H&R, but it looks like H&R has a new customer.  

[ReneeM7122]

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

[Knewman331]

Please stop posting this canned reply.  The process you are describing does not work.  The options listed are not available as they are described in these instructions.

[scentophile]

I think the way to work around is to change the distribution code from 2 (early withdrawal with exceptions)  to  7(normal distribution). When I did that the ms tax was backed out and the federal tax stayed the same. So I ended up paying taxes on federal but not state for the PERS amount. DIACLAIMER!!  I’m no tax pro so choose this solution at your own risk.!!

[scottg29]

This is what I said to this same info from last Wednesday, and it's still true today.

Thanks for your reply.

However, on step 6, I never get the question "Where Is This Distribution From? "  screen.

We are getting multiple people saying their Mississippi (retirement) taxes are not being calculated correctly by TurboTax.  However, other tax software is doing it correctly.  I would like to know if TurboTax is looking at this issue, yes or no?

Thanks.

[Canon951]

Glad I found this thread. I did my taxes this year and for the first time my PERS is being taxed. Have used TT for years with no issues. TT, we need to know if this is being fixed or not. I've been loyal for years but if this is not being addressed I will be looking elsewhere from now on. MS State Retirement is not taxable income for state taxes. Nothing has changed on how the State of MS is doing it. The change is on TT's end. Please give us an update. Thanks. 

[dukes909]

With the TurboTax experts @BillM223 @ReneeM7122  giving conflicting answers I don't have confidence in them anymore.  What else did TurboTax get wrong in doing my taxes???

[Canon951]

This is my 3rd year in PERS and the first 2 years TT did it correctly. I went from getting $500 back this year to paying the state $1000 when I put in my 1099R info in. I was hoping they would address this since it is affecting so many people but it appears you all have already been dealing with this for some time with no luck. 

[DawnC]

For the State of Mississippi

Taxable amounts include:

• Pension and annuity distributions that are taxable as early or excess distributions under the federal rules (see federal Form 5329).   Code 2 indicates an early withdrawal.   

• Separation pay.

• Deferred compensation plan distributions received prior to attainment of retirement age and/or service requirements.

Amounts exempt from Mississippi taxation include:

• Social Security benefits.

• Annuity benefits received under the federal Railroad Retirement Act.

• Retirement income from federal, state, and private retirement systems.

You will either need to get a corrected 1099-R (without a code 1 or 2 - do not change the code in Box 7 without getting a corrected form)  OR

Enter the form you have with code 2 - and ignore the refund meter.    After entering the form in the federal portion of TurboTax, you will be able to exclude the retirement income when you go through the Mississippi state return.  

The ''exception'' for Box 2 is referring to the additional federal tax (penalty) for early withdrawals and does not refer to ordinary federal or state income tax.    When you go through the state return, qualified retirement income can be excluded from your taxable state income.   There is a section (Differences or Changes to Federal Income) where you can exclude taxable federal income from your taxable state income.  

[Knewman331]

You need to give more specific instructions on where to make these changes in the state form section of the software because they are nowhere to be found. I’m done with Tuebo Tax. Going to H&R. 

[dukes909]

Where, specifically, is this "Differences in changes to federal income" in the online version for Mississippi? I can't find it.

@DawnC 

[Canon951]

Hi Dawn. The issue is in years past the "2" code has worked fine in TT. This year for some reason entering the "2" is causing this issue. My prior years 1099-R have all had "2" so not sure what changed at TT to make this suddenly an issue. The State of MS PERS will not issue a corrected 1099R with a "7" since this is not an issue on any other tax software. 

On your instructions are you saying when I get to the state portion and it asks me to put in my income from the 1099R I should leave it blank? Trying to understand what you are saying. Thanks. 

[DawnC]

Is there information in Box 16 of the 1099-R?    And have you gone through all of the follow-up questions in the Federal portion (recurring payments and Box 2a)?   I am trying to recreate the issue in TurboTax Online.   

[SteveInMS]

When did this change?  You need to go back and see how many years code 2 distributions have been excluded from taxable state income.  Show us where and when the change was made. Every year I used TurboTax from when I began receiving a pension until I turned 59 1/2 the pension income was automatically deducted from taxable income and the distribution vide was 2.

Hiw do we get a refund for your defective tax preparation software?