Where do I find the amount used on Form 1099-R that goes on Simplified Method line 3?

[obkgjb]

This item comes up on review for Federal return, I have no clue what it is about.  Sorry.

[dmertz]

You would obtain Plan cost at annuity starting date from your own records showing the amount of after tax money you paid into the plan and remained in the plan at the annuity start date.  If you made no after-tax payments into the plan, you should not be using the Simplified Method because the entire distribution is taxable.

[plp2]

This same thing comes up for me and I don't have an annuity, I have pension payments.  I don't know what to put on Simplified Method Line 3.  Can you help??

[dmertz]

A pension is essentially an annuity.

[BarbaraW22]

The Simplified Method option generally applies when you receive a 1099-R and there is not a  "taxable amount" shown in box 2a of Form 1099-R.

If you previously contributed amounts to your pension or annuity plan that were included in your gross income, you can exclude some of your distribution from your income. You can calculate the tax-free part using the "General Rule" or the "Simplified Method." Please see IRS Topic 411 for more information.

In order for TurboTax to calculate the taxable portion of your distribution using the Simplified Method, you must provide some information. Please see the steps below on where to enter this information:

1. Click on Wages & Income at the top of the screen and scroll down to Retirement Plans and Social Security and click Show More
2. Click on Start or Revisit next to IRA, 401(k), Pension Plan Withdrawals (1099-R) and click Edit next to your 1099-R entry.
3. Click Continue and answer the questions until you get to Tell Us the Taxable Amount Method and then select "Simplified Method" if it is not already selected. Click Continue. 
4. Enter the information in the "Enter Annuity Information" section. See the tips to complete this section and the screenshot below:

Annuity Start Date: The first day of the period for which you receive payment under the contract

Plan Cost: See box 9b on your Form 1099-R

Number of Months Received: 12 if you received payments for the whole year

Tax-Free Amt Previously Recovered: If this is not the first year of your pension distribution and you computed part of your distribution in past years as being nontaxable, you must enter an amount here.

Death Benefit Exclusion: If you are the beneficiary of a deceased employee or former employee, you may qualify for an exclusion

5. Next enter your age when you started receiving the annuity or pension and select Continue.

6. The program will calculate the taxable amount of your 1099-R.

@plp2

[plp2]

Thank you, but I am still confused.  I do have a taxable amount in box 2A on the 1099-R, and box 9b is blank.  So what would go in the Simplified Method line 3 - it is looking for a value and I don't know what I am supposed to put in that box.  

[dmertz]

Unless you have reason to believe that the amount in box 2a is incorrect, you should not be using the Simplified Method.  You should either indicate that the amount in box 2a is the correct taxable amount or that you used the box 2a amount in previous years.  If need be you can delete and reenter the Form 1099-R.

[plp2]

The amount in box 2a is correct.  I was just following the prompts so I don't know how the Simplified Method came up. This is the first year I have pension income; I have not had to answer the questions in that section before. How would I indicate that the amount in box 2a is correct?  I don't remember seeing a question about that.  Thanks for all your help!!

[dmertz]

When you enter a pension payment. TurboTax asks if you received regular, periodic payments.  When you answer Yes, TurboTax asks if this was the first year got these payments.  If you answer Yes, to this, you'll have to answer "I'll specify the taxable amount" if box 2a is less than box 1, or indicate "I made no after-tax contributions."  If you instead started receiving payments in an earlier year, next answer Yes that the amount in box 2a is the taxable amount.

If you mistakenly used the Simplified Method last year and your 1099-R form was transferred in from the previous year, TurboTax will retain the previously entered Simplified Method details, so you may need to delete and reenter the 1099-R.

Posts in this forum suggest that, because the nature of these questions (particularly the question that asks, "I need to figure out how much of this money I took out is taxable"), TurboTax tends to lead one to inappropriately use the Simplified Method and end up getting a tax bill for under-reported income.

Note that if all of the Simplified Method details are entered accurately, TurboTax should end up calculating the same taxable amount as is shown on the Form 1099-R, but it's extremely easy to get any one of those details wrong.

[plp2]

dmertz - I so appreciate your help.  This is the first year I am claiming pension payments.  Box 1 and box 2a are the same amount on my 1099-R.  It sounds like I need to indicate "I made no after tax contributions."  That may be where I went wrong.  I will delete the 1099-R and re-enter using your advise. Thanks again!!  plp2

[dmertz]

Yes, that's correct.