topic Re: 1099R in Retirement tax questions

1099R

butterfly18 — Wed, 11 Feb 2026 04:04:17 GMT

I have recently retired and received a 1099R form. Federal Income tax has been withheld from my taxable amount on the 1099 R form. This is my pension that I am currently living on. When it asks what I did with the money, and I click on cashed out, it adds a couple thousand dollars to what I owe. Why would I owe more taxes on the money I'm expected to live on when taxes were already withheld from the taxable amount?

Re: 1099R

xmasbaby0 — Thu, 08 Feb 2024 19:37:07 GMT

The tax that was withheld was only an estimate --- just like when you had tax withheld from your paychecks and it went on a W-2. When your retirement income is combined with all of your other income--from whatever other sources-- your total income and total amount of withholdings are used to calculate whether you get a refund or owe additional tax.

Re: 1099R

butterfly18 — Thu, 08 Feb 2024 21:04:37 GMT

After I enter the 1099R form, the system says great you don't owe any more taxes on this money. But when I answer the following questions regarding what I did with the money, if the money didn't go back into a retirement account, I owe thousands more dollars. That doesn't make sense to me.

Re: 1099R

VolvoGirl — Thu, 08 Feb 2024 21:09:34 GMT

What code is in box 7? It might mean you don't owe the extra 10% Early Withdrawal Penalty on it. Do you get Social Security? Entering income may make more of your SS taxable.

Re: 1099R

butterfly18 — Thu, 08 Feb 2024 21:12:08 GMT

The number 2 is in box 7.

This is my retirement pension so there is no early withdrawal penalty. No, I do not get SS.

Re: 1099R

BillM223 — Sat, 10 Feb 2024 01:15:27 GMT

I assume that you are speaking about seeing this screen:

You see this screen because you have a code 2 in box 7, so there is no penalty on the early distribution from the pension.

However, you still owe tax on the distribution (i.e., the distribution is added to line 5b on the 1040), UNLESS you rolled it over to another retirement account - in which case the distribution would not be taxable (i.e., not on line 5b). That's why there is the difference in the refund.

Re: 1099R

VolvoGirl — Sat, 10 Feb 2024 01:36:13 GMT

Yes Code 2 means.....Early distribution, exception applies (under age 59½). So are you under 59 1/2? Ask your retirement plan why it's code 2. Regular retirement usually is code 7.

You didn’t actually pay the tax or the 10% penalty (you pay a 10% early withdrawal penalty if you are under 59 ½). You had taxes withheld like from your paycheck. You still have to enter the whole gross amount (before taxes were withheld) with your other income to figure out the total tax (and it may put you into a higher tax bracket) and then the withholding is subtracted from the total tax to figure your refund or tax due. The Gross amount shows up on 1040 line 5a and the taxable amount on 5b. The withholding will show up on 1040 line 25b.