(2) 1099-R before & after 591/2

[Loki-898]

Turbo Tax Deluxe Edition accepts the before 591/2 pension amounts easily, but when entering the after 591/2 1099-R amounts, I’m asked a lot of questions that I have no clue of the correct answer. Then there is a “simplified “ version for an annuity or pension but I feel that that is incorrect, it knocks $3k off my taxable income. I don’t want to be sitting in the IRS’s audit chair later in the year 

[BillM223]

What the Simplified Method is doing is trying to ascertain how much of your distribution on the 1099-R is taxable.

It does this because you may have "basis", that is, after-tax contributions in your pension made while you were employed.

When "basis" is returned to you as part of the distribution, it is not taxed because it already was before it went into the pension. 

So TurboTax has to calculate according to the IRS how much of the current distribution is "return of basis", and therefore non-taxable.

This is the point of all the questions.

Is there an amount in box 2a? Is the "Taxable Amount not determined" box checked?

If you worked for only one employer, the pension fund (if the employer kept the same one the whole time) should know the answers to those questions.

And if you never made any after-tax contributions, then the distribution should be taxed as ordinary income (i.e., box 1 and box 2a are the same) - this is not uncommon as many taxpayers don't make after-tax contributions.

[Loki-898]

State sponsored pension, I had to wait to turn old enough to retire, (service+age=80 rule) company also downsized at same time. All funds put into annuity were pre-tax. Tubo-Tax accepts the pre 591/2 1099-R, no problem, but the latter 1099-R is a different beast. Turbo wants to know annuitants ages, survivor ages, amount when purchased? Well I worked there 32 yrs, so the early years were less than $50, latter yrs, over $300. When I try to call Tubo's customer service they either hangup or I get a recording that says I'm out of their service area! What is that about?? very frustrated to say the least with Turbo tax and the IRS for shoving a stick in the spokes this year for me.

[BillM223]

So is there an amount in box 2a on your 1099-R?

Try this:

1. Answered when asked that this was a qualified plan (I assume it was)

2. You did something else with the money 

3. you got regular payments (I assume that you did)

4. you started getting payments in 2022 or before

5. if there was an amount in box 2a, was it used as the taxable amount?

In fact, if you actually made no after-tax contributions to your pension, then you can short cut the interview, you can put the amount in box 1 into box 2a, and answer that the amount in 2a was used as the taxable amount. This will cause the Box 1/2a amount to be added to line 5b on the 1040. And this will end the interview and you can continue your return.

[Loki-898]

you're very close, box 1 & 2a have different values on both 1099-R's; Early in my career I quit and drew my annuity money out, but after 2 yrs. I returned to the same State agency but in a different position and repurchased my time with after tax dollars. So 1) 1099-R shows less than $60 in box 5; the other 1099-R shows less than $160

I sincerely thank you for your time and knowledge. Good thing I didn't wait until April to start working on this. lol

[Loki-898]

your last question: Box 2a is the taxable amount and there is a value there; But as stated in previous post there is also a value in Box 5

[BillM223]

"So 1) 1099-R shows less than $60 in box 5; the other 1099-R shows less than $160"

So did you really have such a small amount as the total of your after-tax contributions?

What is the distribution code (box 7) for the first 1099-R and then for the second 1099-R?

Did you answer for both that you were getting regular distributions from this pension?

Did you answer that both of these were qualified plans?

"box 1 & 2a have different values on both 1099-R's" does this means that the two box 1s are different from each other, or did you mean that on both 1099-Rs, the box 1 value was different from the box 2a value on the same form?

"Well I worked there 32 yrs, so the early years were less than $50, latter yrs, over $300." What was $50 and what was $300?

[Loki-898]

Q1) yes that small amount in box5;( my understanding is my by-back was treated as a Roth

Q2)distribution code on smaller 1099-R is 7; Larger 1099-R is 2

Q3) I did answer regular distributions for the pension plan, it’s the same plan I’ve been drawing on for the past 10 years 

Q4)It is not 2 plans it is (1) one qualified plan 

Q5)box1 on 1099-R#1, is different from box1 on 1099-R#2; example 1099-R#1,$8,000, box7,2a; 1099-R#2,$4,000, box7,7

Q6)Early & later contributions- annuity/pension money was deducted pre-tax from payroll, when I started at 19, I earned $800/month, hence the $50/month, as years passed the amount increased, as I neared 30 + years the amount was over $300/month deducted pre-tax

I hope this answers your questions, as our tax deadline nears we are going to have the  professionals handle it this year.

thank you for your insight and maybe it’ll help someone else out.

[BillM223]

"my understanding is my by-back was treated as a Roth" - that might be true if it were a separate Roth account, but in this case, I think it is just after-tax contributions in your pension (this is called "basis)". But there is a lot of similarity between a Roth and the basis in your pension (but don't read too much into that).

"Early & later contributions- annuity/pension money was deducted pre-tax from payroll, when I started at 19, I earned $800/month, hence the $50/month, as years passed the amount increased, as I neared 30 + years the amount was over $300/month deducted pre-tax" - OK, since this was all pre-tax, we won't care about that. What we care about is determining the amount of after-tax money in the pension (i.e., the basis).

"I did answer regular distributions for the pension plan, it’s the same plan I’ve been drawing on for the past 10 years " - OK, if you had applied the Simplified Method to each year, you would have been calculating the basis returned to you each year. This is one of the questions in the interview for the Simplified Method. 

However, I am thinking that you have not done this before, so when you are asked how much basis had been returned to you, you will have to answer zero.

In any case, enter the 1099-R for the pre-59 1/2 first, then the other 1099-R. If there are any questions in the interview about your pension. call the pension administrator and see if they will tell you.

In the worst case, you can just declare the box 1 amount as the taxable amount (see waaaaay above) - you would enter up paying tax over the next 10 or more years as the $60 +$160 are treated as taxable income spread out over the remainder of your natural pension, so a small penalty to pay if it allows you to file.