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MichaelJMaggio
Level 1

Tax Free Pension

My wife and I both have Tax Free disability pensions from public service jobs. It is saying we owe, where we shouldn't owe any taxes.

5 Replies
ToddL99
Expert Alumni

Tax Free Pension

How are these pension payments reported to you? Form 1099-R or something else?  If a 1099-R, what is showing in Boxes 1, 2a and 2b?

MichaelJMaggio
Level 1

Tax Free Pension

It’s a 1099R 

box 1 has income 

box 2B Taxable amount not determined marked

box 7 is marked 3

Thank you in advance.

ToddL99
Expert Alumni

Tax Free Pension

And, without proving any personally identifiable information (e.g. name or SSN), why do you consider it non-taxable? Retirement benefits paid early because of a disability are not generally tax-free - they are treated a bit differently, but are still taxable.

 

Who was your employer? Who is making the payments? How long have you been receiving them?

MichaelJMaggio
Level 1

Tax Free Pension

My wife and I were police and Fire, we receive monthly pension checks.

ToddL99
Expert Alumni

Tax Free Pension

As pension payments these are considered "retirement benefits" and are taxable. Retirement benefits paid early because of a disability are not generally tax-free - they are treated a bit differently, but are still taxable (for purposes of federal tax). 

 

If you retired due to a disability, the pension you receive through a company-paid plan counts as wage income until you reach the minimum retirement age (the age at which you can receive a pension if not disabled). Once you reach that minimum retirement age, the pension is no longer reported as wage income but as pension income. This is actually a benefit, since it will count as "Earned Income" for purposes of tax credits.

 

Disability benefits (e.g. short-term, long-term disability insurance benefits) may be non-taxable, depending on the circumstances. VA Disability benefits are non-taxable, and are not reported to you on a Form 1099-R

 

The following post provides additional information on the subject Is disability income taxable?

 

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