Taxable amount of retirement annuity

[mkaprelian]

My 1099-R has an amount in box 2a (taxable amount). I have no reason to think this amount is incorrect. I entered the amount into the turbotax interview. Nevertheless, the interview continued to prompt me for information about how to calculate the amount (Simplifed Method? General Method? Various data about my taxable contributions, when the annuity started, etc.). Is this a bug? Why is turbotax trying to calculate an amount I've already entered directly from the source document?

[ReneV4]

No. It is not a bug. When entering the information about your 1099-R, it is possible that an item was checked which may be causing these prompts.

You mentioned annuity, so if you review the "Annuity information" page, if you indicated that you received periodic payments, this may then lead to further prompts.

If your account is not an annuity, you would answer "No" to the "Peridic Payment" question.

[mkaprelian]

Thanks. It is a FERS (federal employee retirement system) annuity. I receive periodic (monthly) payments. But I have the taxable amount in Box 2a on my 1099-R and entered it into the program. Why is turbotax trying to recalculate it? Is there some other reason for these additional questions? (I note, too, that none of the help screens (with the little ? links) have any information in them. The pop-ups are blank!)

[anonymouse1]

Federal retiree here too - so a monthly pension isn't considered a "periodic payment"?  Should we click No on that question?  I don't remember having this problem last year (though I just checked the Simplified Method since that's what OPM uses).

[dmertz · Accepted solution]

For 2025, TurboTax developers have mangled the wording on the question that is involved.  Rather than the question asking if the amount in box 2a was used as the taxable amount, the question now inappropriately asks, "For the years you received these distributions, was the total amount shown in the form the amount you paid tax on?"  TurboTax actually treats the answer as being to a question that asks, "For the years you received these distributions, was the amount shown in box 2a of the form the amount you paid tax on?"  If the amount in box 2a is correct, you must answer Yes.

[mkaprelian]

Now that makes sense. Thank you.

Answering the question as dmertz suggests generates the following response:

"The taxable amount is $x. We'll use this amount on your return, rather than the gross annuity amount shown on Form CSA/CSF 1099-R."

I still don't think that response is appropriate. But the amount $x happens to be the same amount shown in box 2a on my Form 1099-R, so I imagine the calculations are correct even if the text doesn't make a lot of sense. Also good news: I didn't have to dig up the extra data called for when I answered the interview question dmertz identified above as "no."

[anonymouse1]

I didn't see that - you changed the answer to "Is this a periodic payment?"  to No?  And it accepted box 2a as the taxable amount?

[dmertz]

@anonymouse1 , that would work too.  TurboTax is just trying to determine if using the Simplified Method or the General Rule might be appropriate, but using one of those calculations is only appropriate if the amount in box 2a is incorrect or unknown, and the distributions are periodic.

[mkaprelian]

No. If you scroll up, look for the message from dmertz, which I think has the right answer. To the interview question "For the years you received these distributions, was the total amount shown in the form the amount you paid tax on?" you should answer "yes" if the amount in in box 2a of your 1099-R is correct.

All of this is quite garbled in the turbotax interview, I'm afraid.

[anonymouse1]

I did that, and in the review it's asking me for the starting value of the annuity??

[anonymouse1]

OK I'll try that and see if it gets rid of the further questions about the "starting value" of the annuity.  I don't remember answering any of this last year.

[anonymouse1]

Nope, I picked that it wasn't a periodic payment and the review is still asking me for the plan cost at the annuity starting date - it's treating the federal pension like it was an insurance annuity I bought!

[anonymouse1]

I went back and picked No for the answer to "Is this a periodic payment?" and that the "total" (meaning box 2a?) is the taxable amount and in the review it's still asking me for the "plan cost" when I started the "annuity".

[mkaprelian]

I don't know what to make of your experience. I will say that I had 2 FERS 1099s to enter, and the interview proceeded differently in each case for reasons that are not at all obvious. If you imported information from a prior tax year, the program might be carrying forward information that affects how the interview proceeds. Personally, I found it helpful to switch to forms mode, delete fields that seemed to be triggering errors, and then enter the 1099 information directly on to the worksheets. When I did that, turbotax calculated a "taxable amount" that was equal to the taxable amount shown in box 2a of my 1099s. Deleting the 1099 you're working on and starting over might help, too (maybe back up the file, though, in case it doesn't!) Sorry I can't be more helpful.

[dmertz]

If box 2a shows the correct taxable amount, it might help to delete and reenter the offending Form 1099-R.  Some information regarding the Simplified Method might be stuck in the original.