Simplified method for pension income

[doconnor63]

My wife worked for the federal government early in her career and qualified for a small federal pension. She received payments until her death in 2019. Since then, I’ve received payments as her beneficiary.

Since her retirement contributions were after-tax, I can deduct a portion of the payments I receive.

In TurboTax there’s a worksheet associated with the 1099-R form, called “Simplified Method Worksheet”.

Line 1 shows the “total pension received this year” ($6036),

Line 13 shows the “nontaxable cost” ($1327),

Line 14 & 16 shows the “taxable pension for year” and “smaller of line 14 or 15” ($4709). This is the number that should be used on my Form 1040. But instead, TurboTax uses the “total pension” amount ($6023) as taxable.

Can you tell me how to fix this?

[JosephS1]

Yes, I believe I can help you with this.  You did not state if there is an entry in Box 2a or even if there is a Box 2a on the 1099-R you received.  As such, what you need to do to make sure the total amount is not taxed is to follow these steps:

1. Click on Wages & Income
2. Scroll down to Retirement Plans and Social Security, click on show more, then start, or Edit.
3. Continue through the steps asking about information of the payer of your 1099-R
4. Most people choose "Change How I enter my form" and then "I'll type it in myself"
5. Continue answering the questions
6. You will come to the screens that ask for the providers info and details; enter as it shows on the 1099-R, click continue.
7. Enter the information as it appears on your 1099-R, with one exception - in Box 2a, enter what in your case is $4,709.  Then continue answering line by line.  The input screens will go along with the lines on your 1099-R from beginning to end.

The following is just an example.  The NJ part is for presentation purposes only.

Where do I enter my 1099-R?

@doconnor63 

[doconnor63]

Joseph,

Thanks for your response. I appreciate your help.

On my 1099, line 2a (taxable amount), is blank. So I entered the taxable amount ($4709) manually in TurboTax. Yet the program still uses the full distribution ($6036) on the Form 1040. 

This puzzles me because last year's program used the correct amount without my intervention.

Do you think it's a problem if I use $4709 in line 1 (total received) instead of $6036? My tax calculation would be accurate but the means of getting there wouldn't be.

Dennis O'C.

[JosephS1]

The amount shown in the summary will normally show the full amount received regardless of taxability.  Follow these steps to see if it will show as taxable on the actual return:

1. On the left, click on Tax Tools, then Tools
2. Click on View Tax Summary
3. Click on Preview my 1040 towards the upper left
4. Scroll down to the section showing Form 1040 or 1040-SR lines 1-7
5. Look at lines 5a and 5b.  Are they the same or has the nontaxable portion been adjusted for on line 5b?
6. If it has been adjusted make sure it has not been adjusted twice for the contributed amount that shows on the 1099-R

@doconnor63 

[doconnor63]

Joseph,

Good news--my 1040 is accurate. I was misinterpreting the numbers and now I see that the taxable amount for the pension has been calculated accurately.

Thank your for your patience and your help!

Dennis