Retirement benefits not taxable in NC

[gailwh3494]

where is the retirement benefits section? my NC benefits are not taxable. 

[IsabellaG · Accepted solution]

In North Carolina, you can deduct Bailey, Emory, Patton and Faulkenbury settlement benefits from your North Carolina income. This applies to federal or North Carolina government pensions if you qualified before August 12, 1989.

If any of those is the source of your retirement benefits, you will be able to check the appropriate source after you enter your 1099-R in the federal section. That will transfer your benefits as nontaxable to the NC return.

[Mlpricetx]

Below is a NCDOR directive reference the Bailey Settlement.  If I had just started contributing to the Thrift Savings Plan in July of 1989, what percentage of my withdrawals are eligible and how would I enter that? "Vesting" Period for Qualifying Federal Retirement Systems

Directive PD-99-1 identifies the Thrift Savings Plan (Plan) as a qualified federal retirement system and explains that the Plan has both an employee and an employer component. The employee component is similar to the State's § 401(k) and § 457 plans and allows the employee to contribute voluntarily to the Plan. The employee is vested in the employee component if the employee first made a contribution to the plan prior to August 12, 1989.

The employer component includes both contributions by the employer of a fixed percentage of the employee's salary and contributions by the employer that match the employee's voluntary contributions. At the time the Directive was issued, the Court had not resolved issues about when an employee is vested under either employer component. It also had not decided how the settlement and future income tax exclusion apply to retirement benefits received from the Plan if the retiree is vested in the employee component but not the employer fixed percentage component.

The Court addressed these issues in its Order Supplementing Order Regarding Class Definition With Respect to the Federal Thrift Savings Plan, which was signed by Judge Thompson on March 26, 1999. The Court ruled that an employee who is vested in the employee component of the plan is also vested in the employer component for matching contributions. The Court further ruled that an employee is vested in the employer fixed percentage component only if the employee had three years of service (two years of service for certain highly ranked employees) as of August 12, 1989. The only exception to the three-year (or two-year) rule is that an employee who died prior to completing the mandatory three years (or two years) is still considered vested if the date of death was on or before August 12, 1989.

It is possible for a participant in the Plan to be vested in the employee component but not in the employer fixed percentage component as of August 12, 1989. The annual tax information statement (Form 1099-R) sent by the Plan to every benefit recipient under the Plan does not distinguish between the various components when reporting the amount distributed during the year. Therefore, a recipient who is vested in one component but not both cannot readily determine the amount to exclude from North Carolina income tax. A recipient can use Form TSP-8, Thrift Savings Plan Participant Statement, to determine how much to exclude each year. When a participant in the Plan ceases employment, the recipient is provided a Form TSP-8. The Form identifies the cash balances in the various components. To determine the proper amount to exclude, the recipient should multiply the annual distribution by a fraction, the numerator of which is the balance of the components in which the recipient is vested as of August 12, 1989, and the denominator of which is the total cash balance of all components. That same fraction is to be used for each year the recipient receives distributions from the Plan.

[tvyoskey]

I checked Bailey Vested, and it is still saying I owe almost $1000 in NC taxes.

I do not have to pay NC taxes-  I don't know what else to do?

[DaveF1006]

Follow these exact steps in entering your Bailey Settlement income

1) Go back and edit the 1099-R form in the Federal section.

2) After you enter your 1099-R form, and "Continue" thru the pages that follow it...until you find the selections for:

  1) "Bailey settlement.

  2) "Faulkenbury settlement...."

  3) "Railroad Ret-SS.........."

  4) "None of the above"

3) You need to select the "Bailey Settlement..."

Your NC Distribution amount is the same a box 2a of the 1099-R form (or the calculated federally-taxable amount for box 2a, if 2a is empty)....... that $$ will be removed in the NC section depending on what selection you made above.

4)  Since you meet the requirement that you had five or more years of creditable service as of August 12,1989. , you can choose the Bailey Settlement. ....and all of that particular 1099-R will be exempted from NC taxation. 

5) So that 5-years employment by the Feds/Military, or NC-State Gov't-related plan, by 12 Aug 1989 is critical.

See if these steps work out for you and if reported correctly, your military retirement pay should automatically be excluded from North Carolina State income.

.

[tvyoskey]

I did do all of that, but it still shows owed.

I checked Bailey Settlement Retirement Benefits

Typed in what is in Box 2a for NC distribution

Typed in 0 for NC Withholding

Typed in the State ID

Nothing changed.

I was hoping to get my taxes filed by tomorrow- I do owe federal, but I cannot figure this out.

[tvyoskey]

Hello

I checked the Bailey vested box and entered the taxable income in the correct box ( from 2a)

It keeps showing that I owe nearly $1000 in state taxes.     This is my first time using turbo tax.

I have checked it several times.

[AmyC]

When you are going through the NC return,  see Here's the income that North Carolina handles differently. You should see the Bailey pension listed and the non-taxable amount showing. When you click on Edit, it shows the Bailey Settlement being deducted from the federal pensions.

Are you not showing the Bailey Pension?

• If not, return to the federal section and review your answers after the 1099-R entry.
• If it is showing, then all is well.

[MACR2022]

My pension is from IBM, owned by Fidelity.

I so not have a pension from Federal and or State Government.

I have never been a Federal or State Employee.

I believe I responded “ None of the above”.

I am told I may have to file an amendment after Turbo Tax reviewed/filed 2022 Federal and NC Income Tax forms.

I received two texts and two emails; indicating Federal and NC approved the filing.

Based on the above: Do I owe 2021 federal and state tax on my pension, yes or no?

If I owe tax, how is Turbo Tax fixing this issue?

{PII Removed}

[DawnC]

Can you clarify if you received an email or some other form of communication regarding an issue with your pension income?    @MACR2022

[MACR2022]

Received a call from Turbo Tax

[CarissaM]

We apologized you missed the call. We are unable to schedule a callback here in this public forum. Please follow the instructions here to call us back. @MACR2022

[lgork36274]

My wife was a career employee of the Veterans Administration. We recently became full time residents of North Carolina. Her US pension was never taxed in NY and she was advised that the same applies in NC. We entered the 1099-R in the federal form as we always had; however, as we entered the info for the NC return the funds were considered taxable. Can you explain this?

[Critter-3]

That is not true ... in NC : 

• Social Security income in North Carolina is not taxed
• However, withdrawals from retirement accounts are fully taxed
• Additionally, pension incomes are fully taxed UNLESS ... https://www.ncdor.gov/taxes-forms/individual-income-tax/bailey-decision-concerning-federal-state-and...