Qualifying IRA Distribution

[WDM67]

Confused. Am 69. In 2022, I withdrew a sum from my 401k plan, a one time withdrawal, and it is entered in TurboTax as a taxable withdrawal. On form 1040, line 4b, that full amount is listed. 

For Colorado, TurboTax asks me what is my "Qualifying IRA distribution", with a default value already in the cell as "0". Per the TurboTax fact sheet I pull up, a qualifying pension and annuity income includes "certain IRA distributions reported on line 4b of the federal return." 

As this was a one time withdrawal (I did one last year as well), came from a 401k plan (pension?), and not an annuity, do I enter the entire amount in Turbotax as a Qualifying IRA distribution (the amount on the Fed form 1040 line 4b)?

FYI, for Colorado, part of my SS  is also considered for an exclusion from state taxes, already calculated by TurboTax. 

Thx

[DoninGA]

If the amount withdrawn and the taxable amount is on Lines 4a and 4b then when you were completing the Form 1099-R you selected the IRA/SEP/SIMPLE box.  That is not correct if the withdrawal was from a 401(k) account.  Go back to the 1099-R entry screen and uncheck the box for an IRA and go through all the screens to complete that part of the interview.

[WDM67]

Thank you for the quick reply!

Am looking at the (not yet submitted) form 1040. Box 4a is blank, Box 4b has my withdrawal amount.

Looking at the 1099-R form, the IRA/SEP/SIMPLE box is (X), so I assume that means it is checked. Also "Taxable amount is not determined" is checked, and "State distribution" is the withdrawal amount.

I assume that my company's account is a 401k, but maybe I am wrong on that. I do have a separate IRA. Will check that now.

I was thinking that since it was not an automatic withdrawal (like a regular pension amount), it would not be a qualified amount. 

[MarilynG1 · Accepted solution]

You may be able to also exclude your pension income in Colorado. 

• Taxpayers who are 65 years of age or older as of the last day of the tax year can subtract the smaller of $24,000 or the taxable pension/annuity income included in federal taxable income.
  • Note: For taxpayers aged 65 or older, there is an exception to this limitation for tax years 2022 and later. If the taxpayer's social security benefits included in their federal taxable income exceed $24,000, they can subtract the full amount of those social security benefits on their Colorado return. For tax year 2022 there are separate lines on form DR 0104AD specifically for the subtraction of social security benefits. 

Qualifying taxpayers may claim the subtraction for social security benefits, pensions, or annutities on lines 3-6 of the 2022 Subtractions from Income Schedule (DR 0104AD).

Click this link for more info for Colorado Retirees. 

@WDM67 

[WDM67]

FYI, I am looking at the fund name where I withdrew the money from, and it is "XXXXX 401(K) Savings Plan." It is the plan that the company I used to work for used for our contributions and their % match contributions.

[BillM223]

Based on the name of the plan, it seems clear that this is a 401(k). If the box for IRA was checked on the 1099-R, then the plan administrator owes you either a corrected 1099-R or an explanation (like are they also administrators of your IRA?).

Yes, in many respects, the income from an IRA and a 401(k) plan are treated the same, but sometimes they are not, so you really need to look into this.

[WDM67]

Correction!

I checked my records, and I actually did withdraw from my IRA, and NOT the 401k. My error, so that clears up some of my confusion on that point.

Am going to check next week to see if a withdrawal from my 401k employer plan would be treated the same way. 

Thx for that help!

[WDM67]

Marilyn,

THANK you for this explanation and links to the Colorado document explaining this. This is something I was completely unfamiliar with, and provides me with a slightly larger return from Colorado.  

@MarilynG1