1099-R code 7D -

Forum|Forum|6 years ago
February 11, 2020
4 replies
225 views

This income is taxable in Illinois as I read. Why is the tax software not deducting it from the exclusions on the illinois tax return. The income is included in the excluded retirement income on our return. How do I add it back in?

DavidS127

Level 13

If you believe the 1099R distribution reported as code 7D should not be subtracted from Illinois taxable income, you can find the "subtraction" section of your TurboTax state return for Illinois and delete the excluded amount or include an offsetting amount as a subtraction.

Code D is for "Annuity payments from nonqualified annuities and distributions from life insurance contracts" per page 17 of the IRS instructions for Form 1099 at this link.

See this Illinois Publication 120 Retirement Income, page 2 and 3 for a list of retirement income that is not and is taxable.

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blawrie44

Level 2

Yes the "D" in box 7 means non-qualified and is taxable by the State of Illinois.

I was wondering if the Illinois software with TurboTax recognizes this and does not remove the $ amount from the Illinois return on step 5. (or if you must add it back manually.

Roadking1635

Level 2

The software drop-down does not offer the option to enter 7D in box 7

DaveF1006

Level 15

it is because Code 7D does not exist in Box 7. Are you sure they don't mean that Code D is correct code to enter in Box 7. Code D is a valid option in 7,which is an annuity payment from a non-qualified annuity.

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MuskyMickey53

Level 2

Issue with TurboTax Illinois Tax Return

- 1099-R code 7D Retirement Income is not Illinois State Taxable

- Fix is to check the IRA/SEP/Simple Box.

- This fix will tax your annuity retirement distribution at the Federal level and not tax at the Illinois State level.

- This has been my fix for both 2018 & 2019 tax years

macuser_22

Alumni - Champ

@MuskyMickey53 wrote:

Issue with TurboTax Illinois Tax Return

- 1099-R code 7D Retirement Income is not Illinois State Taxable

- Fix is to check the IRA/SEP/Simple Box.

- This fix will tax your annuity retirement distribution at the Federal level and not tax at the Illinois State level.

- This has been my fix for both 2018 & 2019 tax years

Code 7D is a non-qualified annuity and is NOT an IRA. Checking the IRA box will cause the interview to ask different questions and place what might be an incorrect amount on the wrong line (line 4a/b instead of the proper line 4c/4d) on the 1040 form guaranteeing an IRS audit letter in about a year. (NOTE: for 2018 all 1099-R account types went on line 4a/b, on 2019 1040 forms they are on *different* lines to make it easier for the IRS to detect improper reporting such as this). Do not check the IRA box. The 1099-R box 2a and the interview questions determines the taxable amount for code 4D.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**