Question about NYS pension and annuity income exclusion

[NYres384]

I just came across this thread (12/11/2022), and found it very relevant to my own situation. BTW: a HUGE tip of the hate to 'dovestree21' for his/her Herculean efforts in trying to find a solution to a problem!!) . I have been a TT customer for several years. I inherited part of a parent's IRA in 2018, and have been taking RMDs from this IRA since 2018. For all of 2020, I met the =/> than 59.5 yr age condition for this NYS deduction. I just reviewed my 2021 TT filing.  Even though I reported IRA distributions on line 9 of IT-201, there was a "0" on line 29 of "New York Subtractions".  Nor was there evidence that the TT software used form IT-225 (New York Modifications) to calculate a subtraction to my NY adjusted gross income amount (line 33 of IT-201).  This omission (I take some blame here too) meant a loss of $700+ in 2021 NYS tax return alone. Two questions:

1. Has TT done anything to address this deficiency in their software (since @dovestree21's original post)?

2. Can I amend my 2021 (and 2020) state tax return to get my rightfully owed tax refunds?

[NCperson]

@NYres384 - you have 3 years from the original filing due date to amend.  So that is typically mid-April, 3 years later. But for  2020, Federal and most states moved the deadline to May 15, 2021, so you have until May 15, 2024.  

[dovestree21]

@NYres384  Thanks for the tip of the hat!

I am curious to see whether TurboTax fixed the software. As I mentioned, I ended up calling the NYS tax helpline, and spoke to an agent who told me that the exclusion was appropriate in our circumstances. As I said in previous posts, I was never able to get the TT software to pick up the exclusion, so I hand-typed the return and filed it with NY. I received the expected refund. That means we have lost hundreds of dollars using TT over the past four years when we didn't take the exclusion. 

No refund, explanation, or apology from TT. I won't use them again. I hope you fare better!

[NYres384]

To dovestree21 -

You are belatedly welcome.  I will take your lead and either do my state tax returns myself, or use another dependable service provider who is familiar with NYS tax law.  My attitude would change if TT would contact me directly and explain why they haven't moved on this topic.  This goes to the biggest PITA about services like TT - you just can't easily talk to human (if t all).  Thanks for your efforts again.

[mnkms]

Impossible to get correct exclusion with Turbo Tax Premium when different RMDs are taken from an inherited IRA each year by beneficiaries.

[mnkms]

I have the same question as @taxitrul.

[AmyC]

The $20,000 exclusion is the maximum allowed and it is allocated to beneficiaries based on their percentage of the inheritance. The RMD is going to change every year due to aging and tables and is not related to the percentage inherited.

For example: Ann and Alice inherit their dad's IRA. Each of them gets 50% of the IRA and 50% of the exclusion. They have different ages and have different RMD but the $10,000 exclusion for each does not change.

@mnkms 

[mnkms]

@AmyC  Correct. But in your example if an RMD for one beneficiary is greater than $10,000 Turbo Tax does not reflect the correct exclusion of $10,000.

[AmyC]

@mnkms I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the  directions below:

TurboTax Online:

Sign into your online account.

Locate the Tax Tools on the left-hand side of the screen. 

A drop-down will appear. Select Tools  

On the pop-up screen, click on “Share my file with agent.”

This will generate a message that a diagnostic file gets sanitized and transmitted to us.

Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

Open your return.

Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent”

This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.

Please provide the Token Number that was generated in the response. 

[mnkms]

@AmyC 

Thank you Amy

Token number is 1096971

[AmyC]

 Since I don't know what percentage the beneficiary is, I used 50% for my playing around. Since I was using 50%, that meant that I had to double the amount on total amount of decedent pension. 

You had 100% went to one person which allowed the excess exclusion.

I changed it to 50% and got half the exclusion

Here is what you need to do:

1. Return to your state and go to the Retirement Distributions Summary.
2. Select Edit
3. Beneficiary? Select Yes
4. Decedents date of birth, enter
5. Total amount of decedent pension -if you are 50% beneficiary, double the amount you received. Enter whatever number works with your beneficiary percentage. Example: If you received $8,000 and there are 4 other beneficiaries, you received 20% of the total. The total to enter here would be $8,000 x 5 = $40,000.
6. Exclusions claimed on decedent return - enter zero
7. Your Percentage Share of Total Distribution - enter the percentage that is correct for your share of the inheritance. For example, above as one of 5 beneficiaries, enter 20% here.

@mnkms 

[mnkms]

@AmyC 

Thank you Amy. I do understand what you have done. Here are a few more details. One decedent's IRA was split 50/50 with 2 beneficiaries. Each beneficiary now has their own IRA as a beneficiary of the Decedent. RMD for beneficiary #1 is about $13,000. The RMD for beneficiary #2 is unknown but my guess would be maybe around $3,000.  Beneficiary #1 is a NYS resident whereas beneficary #2 is not. My understanding is that each beneficiary is entitled to a $10,000 exclusion even though beneficiary #2 will not be taking the NYS exclusion. If I were to use the 50% it would only exclude 50% of the $13,000 whereas I think it should exclude a full $10,000.  My turbo tax shows only half of the total not the $10,000 you show. Beneficiary #2 would not exclude anything since they will not file NYS.  If I did in fact know the RMD for beneficiary #2 and added that the my RMD for a total then using 50% would still not be correct for either beneficiary.  I could make up a number to get to the $10,000 but that would not agree with the 1099R. 

[AmyC]

There is a difference between the tax return and the pension exclusion worksheet.

1. You should exclude the full $10,000 since 50% beneficiary. There is no way you can be expected to know everyone else's RMD which is why you use the trick of doubling the amount of decedent for a 50% beneficiary. More on this, see #3.

2. No, the 50% does not apply to the dollar amount, it applies to the $20,000 exclusion. You want to say 50% to get the $10,000 exclusion.

3. Correct, you have to double the amount of the decedent pension. You are entering your share instead of doubling it. This is for calculation purposes only. Your actual amount from the form comes into the return. This is for the worksheet to calculate the exclusion. Two different things. You can't use the actual amount for the full pension. You have to double it for the program to calculate the correct exclusion for 50% of the decedent pension.

Again, the 1099-R is safely entered in the return. This is a worksheet calculation.

Your goal is to have the proper exclusion and the correct percentage. Please follow the steps from before and it will work correctly. You just need to double the distribution for the decedent amount and it will work perfectly!

[mnkms]

@AmyC 

Thank you Amy.  I had tried this before but was concerned about the "double pension" and therefore was concerned about the discrepancy. But you have confirmed that this is an appropriate work around. Thank you very much. Perhaps Turbo Tax could provide this explanation within the software for other users.