Nonqualified deferred compensation

[teeare]

I receive deferred compensation from my former employer.  It is reported via a W-2.  Box 11 (nonqualified plans) is populated with the same amount as Box 1.  In past years, Turbo Tax has treated that as ordinary income, and listed it in the income section of the 1040.  But this year, this income appears on Schedule 1, line t.  Why the difference?

[DMarkM1 · Accepted solution]

Yes, you are correct.  For some reason the IRS added the line 8t to break out non-qualified/deferred compensation. However they also state in the form W2 instructions that the amount in box 11 remains in box 1 on the W2 so there is a disconnect in the IRS system.  

Of course the income should not be in both places on the 1040 (line 1a and line 8).  Additionally, whether the income is on line 1a or line 8 it is taxed the same.  

Further, Box 11 is informational for the taxpayer, it used by the Social Security Administration to verify that they have properly applied the social security earnings test and paid the correct amount of benefits.  The SSA already has their copy of your W2 for their purposes.  

With that in mind enter your W2 exactly as shown on your form.  When you arrive at the follow on question asking "Did you take money out of a nonqualified pension plan?"  You should answer "NO" that will leave the money on line 1a and not create the schedule 1 line 8t entry. 

This will eliminate the rejection and your tax calculation will not be affected.   

[teeare]

This workaround worked just fine.

Thank you for the prompt response!

[Eagle 66]

I wish that I had read this reply earlier. I answered "Yes" for the question on "if I had taken money out of NDC account" and TurboTax remove the amount from Line 1 of W2. I was thinking that this is a programing bug, not knowing better.  I had to add it back in during state allocation for the state income that it is needed for NY state. 

[coastielt]

While entering the W-2 from my previous employer for executive deferred compensation (SERP) I was also confused regarding how to answer the "Did you take money out of your non-qualified pension plan?" question. My search of the Community turned up the answer (Question and Answer shown below), so I checked "Yes I took money ..." and completed the W-2 entry. When all my income was entered and the review Wages and Income summary appeared I saw that the amount I had entered for this W-2 was showing up in the "Other Income or Loss" line rather than "Wages and Salary"where I had entered it.

I did another search in Community regarding why the W-2 income was showing up in the Other Income or Loss and found this answer, Which instructs users to select the "No, this is money I ..." option. Now I'm more confused because these answers directly conflict. Can you please clarify which is the correct answer?

_______________________________________________________________________________________________

Nonqualified Pension Plan - Taking money out vs Contributing

When entering the W-2 for the Executive Deferment (which my husband contributed to) the Turbo Tax question is "Did you take money out of your non-qualified pension plan?"  The two possible answers are: "Yes, I took this money out of my nonqualified or Sec 457 plan"  OR "No, this is money I contributed to my nonqualified or Sec 457 plan."  This is money he is receiving quarterly (he's retired) but he did contribute to the amount while working.  Which answer is correct?  

Thank you for your help.

BillM223

Employee Tax Expert

If he is receiving money quarterly from the plan, then you answer, "Yes, I took money out of this nonqualified or Section 457 plan"..

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‎January 29, 2024 3:56 PM