1099-R Federal Withholding exceeds Gross Distribution

[Eagleonthebeach]

On my 1099-R  the Federal Withholding exceeds Gross Distribution and TurboTax incorrectly kicks this out as an error. How do I fix this bug. 

In 2021 I surrendered a life insurance policy that was 75 years old and had a cash surrender value of $4649.51.I received a check for $3649.51 and I had $1000 withheld for federal taxes. 

My 2021 1099-R from life insurance company showed Gross Distribution on $920.69 and Federal Tax Withheld of $1000. When I entered the 1099 into TurboTax I got an error telling me Federal Tax Withheld can not exceed Gross Distribution.

I contacted the life insurance company and was provided with documentation that showed that the Taxable Gain of $920.69. I have been paying federal taxes annually on the interest earned. which accounts for the difference between the cash surrender value and the Taxable Gain that is in the Gross Distribution box on the 1099-R.   

When I surrendered the policy in 2021 I was not aware that only $920.69 was taxable and I elected to withhold about 20% of the cash surrender value of $4649.51; hence Federal Tax Withheld exceeds Gross Distribution

How do I enter my 1099-R into TurboTax Premier and report the $1000 withheld for federal taxes?

[DianeW777]

Enter the 1099-R and do not include the federal withholding in that section. The federal withholding can actually be entered in a different way since you have an error when entering it as it actually is.  By the way, this is a normal reaction by TurboTax because the IRS does not like suspicious withholding and your case fits the scenario when looking at the numbers. 

Enter the federal and/or state withholding here:

• Deductions and credits >  Other income taxes > Yes > Other income taxes paid in 2021 > Withholding not already entered on a W2 or 1099 
• Continue to enter your withholding

[dmertz]

It's impossible to have $1,000 withheld from $920.69.  If the cash surrender value was $4,649.51, $4,649.51 is the amount that should be in box 1 of of the Form 1099-R.  The taxable amount of $920.69 belongs in box 2a.  With $1,000 withheld for taxes, presumably you received the remaining $3,649.51 in cash.