topic Retirement buyout treated as an IRA withdrawal? in Get your taxes done using TurboTax

Retirement buyout treated as an IRA withdrawal?

artworksmetal — Mon, 23 Feb 2026 13:42:55 GMT

My wife retired in 2022 from a state university professor position. She was given a five-year "buyout" of about $40,000 each year. ($20,000 the first year due to it being half of the year). TurboTax is treating this as an IRA distribution because it is reported on a 1099-R.
Is that correct? Since she still worked in 2022 that strikes me as being potentially higher liability.

Although, she is 65 so maybe it doesn't matter?

Anyone's help will be greatly appreciated.

Re: Retirement buyout treated as an IRA withdrawal?

ErnieS0 — Wed, 01 Feb 2023 14:45:15 GMT

Did your wife get a W-2? You said she received $20,000 the first year because it was for only half the year so her salary may be on the W-2.

Money coming from a university would not be an IRA. Check your entry. The IRA/SEP/SIMPLE box should not be checked. If the IRA box is unchecked, TurboTax will treat it as a pension and ask you additional questions so continue through the screens again.

If this was a buyout her age probably will not matter. There is a 10% early withdrawal penalty for distributions before age 59 ½ from a retirement plan. So if part of the payment came from a retirement plan she meets the age requirement to be exempt from the penalty.

Re: Retirement buyout treated as an IRA withdrawal?

dmertz — Wed, 01 Feb 2023 23:01:51 GMT

In what way does it appear that TurboTax is treating this as an IRA distribution? If it's not appearing on Form1040 line 4a or 4b, TurboTax is not treating it as an IRA distribution.

Re: Retirement buyout treated as an IRA withdrawal?

artworksmetal — Sat, 04 Feb 2023 16:35:43 GMT

Thank you both. My bad - it was under pensions and annuities.