NYS Income Adjustment

[BarbC16]

My NYS return shows a NYS Income Adjustment of ($40,000) for 'Pension & Annuity Income Exclusion". I don't know why I have this adjustment. My husband and I both have NYS retirement pensions but the credit for those show on the state form as adjustments along with our Social Security adjustments.

[LenaH]

Per NYS, taxpayers over age 59 1/2 can deduct up to $20,000 of certain federal, NY state or local government pensions and certain IRAs on their New York return. If married filing jointly, each spouse may deduct up to $20,000, which would total the $40,000 you see on your return. 

In addition, you stated you both have NYS retirement pensions. Some of NYS retirement pensions are completely exempt. 

Per New York State, qualified pension benefits or distributions received by officers and employees of the United States, New York State, and local governments within New York State, are exempt from New York State, New York City, and Yonkers income taxes. 

In the TurboTax software, please make sure that you picked the correct classification in the software if your 1099-R is fully exempt. 

If you determine your pensions are fully exempt, please follow these steps and make sure all the required fields are completed:

1. Open your return.
2. Click on Personal Income, under the Personal tab.
3. Click Edit next to the 1099-R you want to correct.
4. Enter the information as shown on your 1099-R. 
5. Answer the questions on the next two screens.
6. Make sure the correct source of your 1099-R is selected. In addition, keep the NYS distribution amount as the full pension distribution. It will be shown as deducted fully on a later screen.
7. Click on From a qualified plan on the screen Was this distribution from a qualified plan?
8. Answer the required minimum distribution questions on the next screen.
9. Finish answering the questions about your 1099-R.
10. Once you are back to your federal 1099-R summary screen, click on State Taxes tab above. 
11. Click on Edit for New York.
12. The next screen should be your pension summary screen and will show your pension fully deducted.

[BarbC16]

So even though our NYS pensions are showing as being fully exempt from NYS taxes we can still deduct the additional $40,000? Our Federal form is showing the pensions taxable amount but the NYS form is subtracting the Gross Distribution amount.

[LenaH]

No. It is either the $40,000 ($20,000 for each spouse) OR the full exclusion. You cannot exclude more of the pension you received. If it is qualified for the full exclusion, you should follow the instructions provided above. If not, then TurboTax will automatically exclude $20,000 for each pension if you are a New York State resident. 

The 1099-R's are taxable on the federal level. This exclusion is for NYS taxation only. 

@BarbC16

[Donniemac]

The New York State Tax exemption for the New York State and Local Retirement System (NYSLRS) is not calculating correctly on TurboTax. Hopefully this error will be corrected with an update. It is defaulting to the $20,000/$40,000 retirement exemption. If this is the case, you can click on the New York State and City Education box to see if this changes your State Taxable amount. They are both fully New York State Tax exempt and should calculate the same. If the amounts are different, I would wait to file until an update corrects the issue.

[LenaH]

Per New York State, qualified pension benefits or distributions received by officers and employees of the United States, New York State, and local governments within New York State, are exempt from New York State, New York City, and Yonkers income taxes. 

In the TurboTax software, please make sure that you picked the correct classification in the software if your 1099-R is fully exempt. 

If you determine your pensions are fully exempt, please follow these steps and make sure all the required fields are completed:

1. Open your return.
2. Click on Personal Income, under the Personal tab.
3. Click Edit next to the 1099-R you want to correct.
4. Enter the information as shown on your 1099-R. 
5. Answer the questions on the next two screens.
6. Make sure the correct source of your 1099-R is selected. In addition, keep the NYS distribution amount as the full pension distribution. It will be shown as deducted fully on a later screen.
7. Click on From a qualified plan on the screen Was this distribution from a qualified plan?
8. Answer the required minimum distribution questions on the next screen.
9. Finish answering the questions about your 1099-R.
10. Once you are back to your federal 1099-R summary screen, click on State Taxes tab above. 
11. Click on Edit for New York.
12. The next screen should be your pension summary screen and will show your pension fully deducted.

@Donniemac

[Donniemac]

I've done all of the above.

TurboTax has issued the following statement. "New York customers are currently experiencing an issue in TurboTax causing their New York State pension exclusion to be incorrectly calculated. We expect this issue to be resolved by 02/19/21. If you would like to receive progress status updates, please sign up here."

[NYDoug]

I had the same problem. The first guidance for resolving this (yesterday) had nothing to do with this TT error and didn't work when I resubmitted my return.  The guidance today addressed this problem and significantly increased my NYS refund.  I made the mistake of trusting TT too much and not going over every entry with a fine tooth comb.  Hopefully this will submittal will be accept by NYS.  Very disappointing.