Nebraska Tax on Retired Veterans Pay

[dwaine1980]

I do not pay state taxes on my Nebraska Military Retirement Pay. However, I did have them take out $90 each month to ensure I do not owe any state taxes when the time comes to file both Federal and State taxes. When I enter my 1099R for the amount earned the program still has me owing money for State. Where my refund should show the $1080 that I had them taken out of each month pay, it shows that I owe money even though I had a large sum for a refund prior to entering the numbers from my 1099R. Any help in rectifying this situation would be much appreciated. Thanks, Dwaine

[DMarkM1]

Yes, you are correct.  For tax years beginning with 2022 NE allows an exclusion of 100% of military retirement pay from NE taxable income.   The NE forms are not quite ready for filing yet.  The estimated date is 1/26/2023.  The update should allow the new military retirement exclusion.  

Click here for the forms availability tool. 

Click here for more information on the NE military retirement exclusion. 

[Mike305]

Thanks, I am in the same situation. I thought I was doing something wrong.

[MichaelG81]

Make sure under your 1099-R for Military pension withdrawal that you put State information for boxes 14-16 from your 1099-R as long as the amount is there it should be reported as a payment to the state of NE. If this is a military plan make sure you choose Non Qualified Plan for, Was This Distribution From A Qualified Plan? After entering, select continue, for more interview questions next to add another 1099R. Unless you have other income like investments and other W2s, some other income maybe taxable using what was withheld from your military Retirement Pay, which in essence would be lowering your tax liability on other income possibly made. But when I enter it it gives it all back from NE. Is there anything else we need to know about additional income sources, spouse income if applicable, etc.?

@Mike305 

[Mike305]

Good afternoon, I just did the update and there was no change to my amount owed. I am not sure what I am doing wrong. Would I need to start over or would the saved form update with the new rules. Thanks Mike

[DaveF1006]

You are going to record that information yourself in your state tax return. Go to the state taxes section of your return and go to the page that is titled Adjustments Decreasing Federal Income. There is an entry that is titles Military Retirement Pay Exclusion. List the amount of your military pension that you wish to exclude and then answer the follow up questions that remain in that section of your return. Here is what this looks like.

Let me know if this works

@Mike305

[Mike305]

I appreciate the advice. It worked after doing what you said. Thanks Mike

[dwaine1980]

Apparently the update for Nebraska forms has not happened yet as of 2/9 because it still populates as me paying state taxes on my military pay. Any idea when this will be fixed. Thanks, Dwaine

[dwaine1980]

There is no amount listed in 14-16 because I do not have to pay state taxes on my military retirement pay. However. the program still shows that I should be paying taxes and I owe money. Prior to me entering this 1099 I had several thousand coming back in Federal and three thousand coming back in state. Once I put in my gross distribution, they both change. Federal I understand until I enter the federal withholding taxes. My state refund should not have changed since I do not have to pay state taxes. I did pay $90 dollars each month to ensure I do not have to pay state taxes on any income I list. So, the $1080 that I did pay should have been added to my refund. Not sure how to explain this further. Either the program is not up-dated, or it is completely wrong in its calculations. 

[DMarkM1 · Accepted solution]

You are correct in that when you enter the 1099R in the federal interview the income does show as NE taxable income and your running refund total reflects the NE tax increase.  However,  you now need to go the NE state interview to exclude the military retirement pay from NE taxable income. 

1. Go to your NE state return
2. "Update" the "Adjustments" section
3. Click through to the "Adjustments Decreasing Federal Income" page
4. Locate the box for Military Retirement Pay Exclusion
5. Enter the amount of your military retirement pay from box 1 of your 1099R

 @dwaine1980  

[dwaine1980]

Not sure if this is correct. I am not reducing my federal amount of wages for my military pay. Just my Nebraska amount because I know that is 100% not to be taxed by the state.

[AmyC]

Exactly! NE begins the  state return with the Federal AGI.   

Follow these steps:

1. Go into your state return, not the federal - it should be done. 
2. In the state section, continue through to adjustments page. 
3. You do want to adjust the federal income that is listed on your state return and reduce it.
4. Enter your military pay.

@dwaine1980 

[dwaine1980]

Thank you and your advice worked out great for me. I do have another question. I just received a letter from one of my 1099R that their Employer FEIN was incorrect. I have filed my taxes for 2022. Do I need to amend and resend my taxes? Will this cost me anything? Will it keep me from receiving my refund for my state taxes? I have all ready paid what I was required of for my Federal Taxes. Thanks for your assistance, Dwaine Sutter

[dwaine1980]

Thank you and your advice worked out great for me. I do have another question. I just received a letter from one of my 1099R that their Employer FEIN was incorrect. I have filed my taxes for 2022. Do I need to amend and resend my taxes? Will this cost me anything? Will it keep me from receiving my refund for my state taxes? I have all ready paid what I was required of for my Federal Taxes. Thanks for your assistance, Dwaine Sutter

[DMarkM1]

No, you should not need to amend due to incorrect Federal ID number on a 1099R.  The tax agency will be able to reconcile the income on that form as long as the box amounts entered match the form you received.