How do I enter my police disability income as non-taxable?

[graylady]

I do not see anything that says "IRA, 4701(k), Pension Plan Withdrawals (1099-R). " And there is no screen shot.

[DaveF1006]

When the taxpayer is an eligible "retired public safety officer", defined by the IRS as a "law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew", they can elect to exclude up to $3,000 of the distributions they receive from an eligible retirement plan from their taxable income. To be eligible for this exclusion, the funds must be used to pay for accident or health insurance premiums or the premiums associated with a long-term care contract for the taxpayer, their spouse, or their dependents. 

To claim this deduction, make sure that you don't check the box stating that this is an IRA. It's not, it's a pension distribution.  In the questions regarding the 1099R, the program will ask if your husband was a police officer and if you say Yes, it will ask questions about the Health insurance premium and if it was deducted from the taxable distribution. if so, you will receive up to a $3000 adjustment lowering your taxable distribution.

Lastly, this is a retirement distribution and since he is of retirement age. The distributions are taxable distributions.

[dsanger8]

I have a similar question.  I receive a police disability pension and am not yet of retirement age.  The last 2 years I have used TT and did not pay income taxes on my pension.  The IRS is now saying I owe back taxes.  Is there a statute or bill that confirms my position?

[DMarkM1]

According to IRS Publication 575, you could have deducted up to $3000 from your pension distributions as a retired Public Safety Officer under certain conditions. Below is an extract for your review. 

"If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. The premiums can be for coverage for you, your spouse, or dependents. The distribution must be made directly from the plan to the insurance provider. You can exclude from income the smaller of the amount of the insurance premiums or $3,000."  

Other than that deduction, the IRS Publication 575 states:   

"If you retired on disability, you must generally include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on Form 1040 or 1040-SR, line 1; or Form 1040-NR, line 1a, until you reach minimum retirement age. Minimum retirement age is generally the age at which you can first receive a pension or annuity if you aren't disabled."

[dsanger8]

Thank you for your response.  I am aware of the $3000 credit however the wording is for those who "retired" on disability.  I was honorably discharged as a police officer prior to my retirement age.  I am 47 you and will reach full retirement age at 52.  Box 7 on my 1099-R is labeled 3.  Any thoughts?

[Rainman12]

IRS Pub 575, Page 6, details special PSO treatment, which clearly defines the $3k for payments made directly for certain types of insurance plans. Beyond that, there appears to be NO REDUCTION in taxability of 1099-R, Box 7 Code 3 income. The tax benefit comes from the fact that this can be considered Earned Income, thus qualifying recipient for EIC and similar benefits. Link: https://www.irs.gov/publications/p575#en_US_2020_publink100031158 

[JohnDoucette]

After completing your instructions, I checked the "Yes, this money came from employment as a public safety officer. When I return to check the section, it had reverted to "NO" and now it shows the pension is taxable. It does this every time I re-check. How do I fix this??

[DaveF1006]

It depends on how you answered the question. According to this Turbo Tax post  written by CarolC, you can exclude up to $3000 if the money was used to pay Health Insurance Premiums. Here is how to report. 

1. Enter Form 1099-R exactly how it appears.  Answer Yes to the question, if you were Employed as a Public Safety Officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew). 
2. Answer Yes, if the Pension Administrator Paid for Health Insurance.
3. Enter the total amount paid for the Health Insurance Payment Amount.  If needed, TurboTax will reduce the deduction to the $3,000 allowed.  

[JohnDoucette]

I already knew this information and it did not apply to me. I am a disabled PSO. When I check the "disabled" box, it does not stay checked. It obviously is a technical issue and I can't contact anyone at Intuit to remedy this issue.

[LindseyLO]

Have you tried clearing your cache? This may help. Assistance with doing so has been provided by clicking here. 

[JohnDoucette]

Thanks for actually reading my question. The cache was cleared but the issue continues. This happened in the past but then I was able to call someone to walk me through it. You wouldn't happen to know how to contact tech support??

[DaveF1006]

To clarify, call 1-800-446-8848 for a Tax Support expert to look at your screen.

[JohnDoucette]

I have been on my page several times. I "search" for my issue and get numerous, none of which are even close to my issue.

Can I assume that TurboTax no longer provides support for taxes? The "hit and miss" question search doesn't cut it.

[DaveF1006]

@JohnDoucette According to this Turbo Tax post written by Paula M, this is taxable income at least federally. There doesn't seem to be any contingency that suggests otherwise. It may however, be excludable in your state depending on which state you live in. To clarify, can you provide me a link that says otherwise?

[JohnDoucette]

First, this article: https://frostbrowntodd.com/new-federal-law-confirms-public-safety-officers-benefits-2/. And, yes, I know this article doesn't prove anything. But I've not paid taxes on my disability pension for almost 20 years.

Second, I'm not saying it should be untaxed, I'm saying there's a glitch in the software that will not allow me to confirm that my pension is a result of a disability incurred will serving as a Public Safety Officer.

All I want is the software to recognize that my disability was the result of my employment. I already checked box 7 ("3-Disability") and the program took that.

I only need the checked box for  “Yes, this money came from employment as a PSO” to remain checked.