I received 1099-R from my employer's agent who processes rollover and distributions from the retirement plans. I retired last year and received 1099-R which (incorrectly) shows a required minimum distribution (RMD) amount on Form 1099-R, Box 16 (State Distribution) for the Pennsylvania State. Consequently, TurboTax is treating the Box 16 amount as state income and taxing me on this amount. This needs to be corrected because PA does not tax the income/distributions from 401(K) and qualified pension plans. How can I exclude this amount from the PA state income? Please help?
When you go through your PA return, there is a question:
What kind of retirement income did you have from Pennsylvania
Chose the correct answer, most likely it will be I'm eligible, Plan's eligible, (no PA tax)
That will keep the pension from being taxed in PA
Hello Mary, thanks for your response.
I believe, I did answer the questions exactly as you suggested, but it seems Turbo Tax over-rode this info and still placed the RMD distribution amount from Form 1099-R into my PA state gross compensation & wages (Line 1a, PA-40).
I went back to the Federal return and zeroed the state distribution amount where you manually enter the data from 1099-R into TT. Surprisingly, despite this data entry change, nothing changed on my PA state return, which tells me that I can't remove/alter the data once I have entered into the turbo tax. Perhaps I am missing something or doing something wrong, I would appreciate any help around this problem.
There is a problem with the way your federal income transferred to PA.
Use the Chrome browser and clear browsing data for all time before signing into TurboTax.
Delete the PA state return.
Close TurboTax, sign in again, add PA again and this time the information should carry successfully.
My apologies I misspoke and misled you. Let my try again to give you the correct and complete info.
After retiring last year I rolled over my employer pension plan to an external investment company. So my employer issued two Form 1099-R, #1 for an RMD amount I had to take as per the IRS rules, #2 for the balance amount rolled over for direct transfer to the investment company.
#1 1099-R shows Box 7, code "7" (i.e., normal distribution), this RMD amount is also shown on Line 16 "Gross Distribution" for the PA State in addition to the Federal Gross distribution on Line 1 which is fine. For this #1 1099-R, PA State TT does NOT ask me the question, if this distribution/amount is PA taxable or not. Consequently, it includes this RMD amount as my PA taxable income. It was incorrect when I said even when I zero out the Line 16 amount, TT cannot remove the amount I originally entered into TT.
For the #2 1099-R, Box 7 shows code "G" (ie, direct rollover of a distribution to a qualified plan or IRA). The amount from this 1099-R is not carried over to the PA State Gross Distribution. Turbo Tax does ask the question whether this distribution from Federal Line 1 is PA taxable or not which I correctly answered and it does not show on my PA return.
Does TT has a way around to force the PA Gross Distribution on #1 1099-R to exclude it from PA state wages and income on PA-40, Line 1. The PA state rules are very clear that any retiree income including the RMD are not taxable in PA.