State tax on your pension in Pennsylvania

[lemley981]

When i put my pension amount in Turbo tax its creating a Pa state tax, I never had to pay state tax on my pension before. What changed?

[DianeW777]

Nothing has changed. You are correct, Pennsylvania (PA) does not tax normal pension distributions at retirement. You can file only your federal return as e-file, not the state (unless you have other income to file for PA).

• How to skip filing state when you file federal
• How to clear my state return for Windows

However to fix this in the PA interview you must select in the Form 1099-R the following dropdown selection as shown in the image below.

[lemley981]

Turbo tax is not giving the option to choose that code? It has in Box 7 a Code 3 which is disability pension which i have been on for 5 years now and never had to pay state taxes? Please help.

[lemley981]

That option used to be there.

[lemley981]

Its even making me pay state tax on my 401K which i didn't think you paid state on that either. The code there is Code 7 (normal Retirement) There is  no drop down for where no Pa Tax taking out?

[lemley981]

Got it! I'm a idiot

[erniemanwv]

I did click on I am eligible, plan is eligible (no PA tax) but Turbotax keeps my pension Taxable.  In the Federal return, Box 7 has code 7, and there is no entry for state distribution in boxes 14, 15 and 16.

Turbotax needs to fix something!   The PA return is either faulty, or at best hard to find the correct entry.

[ErnieS0]

Do you have a qualified or nonqualified plan @erniemanwv? Distributions from nonqualified plans are taxable as interest in Pennsylvania. TurboTax will add this into your income even if you selected "I'm eligible; plan's eligible (no PA tax)."

Check your federal 1099-R enter to see whether you said your plan was qualified or nonqualified.

1. Type "1099-r" in Search in the upper right
2. Select "Jump to 1099-r"
3. On Here's your 1099-R info, click Edit
4. You will see a screen What kind of retirement plan do you have with....?
5. make sure Qualified plan is checked

[erniemanwv]

Thank you. Finally, on the fifth try, Turbotax accepted I am eligible...(no Pa Tax). 

[Jschlenker86]

How con I remove the Pension Payments on my PA return??

[ErnieS0]

Distributions from an eligible Pennsylvania retirement plan are not taxable if you meet the plan requirements (the age and/or years of service required by the plan) for retirement, and retired after meeting those requirements.

Refer to How do I know if the amount on my 1099R (1099-R) is taxable on my PA Personal Income Tax Return?

You can change the coding in the Pennsylvania section to tell TurboTax that your pension is not taxable.

Here's how:

1. Start Pennsylvania
2. Continue to What kind of retirement income do you have from Pennsylvania?
3. Select I'm eligible, plan's eligible (no PA tax) 

@Jschlenker86