Turbo tax says if you leave 2z blank (for Unknown) on CSA1099R retirement income, the entire amt is taxed. Is that correct?
Yes. Put a zero in the box and it will understand that none of the amount is taxable. Put the exact same amount as in box 1 in box 2a and it will understand it is all taxable as well.
My CSA 1099 box 2a says "unknown". How do I figure out the taxable amount? TurboTax is asking if I used the Simplified Method or General Rule, I haven't used either.
For a Civil Service Annuity (OPM), you will used the Simplified Method. When you indicate Simplified Method, it will take you through a series of questions which are designed to allocate your basis over your distributions.
If you have no basis in your annuity (basis is the amount of after tax dollars you contributed to the annuity/pension while you were working), then it's easy - your whole distribution is taxable. In the CSA-1099 interview, just say that you did not make any after-tax contributions, and TurboTax will list all your distributions as taxable and stop asking you so many questions. Note that it's likely that the majority of taxpayers don't make after-tax contributions to their pensions/annuities.
The problem comes in when you have basis in the pension/annuity. Since you have already paid tax on these after-tax dollars, you aren't taxed on then again when you have them distributed to you on (probably) in monthly payments. However, you don't get to choose what you are taking out each month (basis or taxable pension payments), so they devised the Simplified Method to figure out how much basis (i.e., non-taxable dollars) are in payments.