Non-qualified pension annuity

Forum|Forum|2 years ago
February 5, 2024
2 replies
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I am currently receiving 3 monthly annuities from my former employer: one payment is made through a qualified pension trust; the other two payments (a pre-2005 benefit and a post-2004 benefit), are both made through the employer’s assets, as those two payments are “non-qualified.” The qualified annuity is reported on a 1099R; the two non-qualified payments are reported on W-2s, both of which have the annuity amounts listed in boxes 1 and 11. The annuities commenced as follows:

Post-2004 annuity – June 2021

Qualified annuity – June 2022

Pre-2005 annuity – June 2022

In 2021, TurboTax did NOT include the pension exclusion amount in my New York State return (I reached age 59 ½ prior to 2021.) In 2022 and 2023, TurboTax did calculate the exclusion amount and put it into my tax returns. Upon further research, it appears the software trigger for the credit is the 1099R for the qualified benefit. The way I determined this is I input a “hypothetical” 1099R into my 2021 return, and the pension exclusion amount appeared on my NYS return. In addition, I deleted the 1099R from my 2023 return, and the pension exclusion amount disappeared.

Based on the research that I did, it appears the non-qualified payments are eligible for the exclusion. In order for me to file an amended return for 2021, I need to input the pension exclusion amount into TurboTax. I know I can put in an override in the appropriate cell, but the software will prevent me from e-filing a return with the manual override input. I have the following two questions:

Is this a software glitch, or am I misinterpreting the regulations?
Is there a way to systemically get the exclusion input so I can e-file an amended return?

DaveF1006

Level 15

Yes. It could be a software glitch in the program because I checked this NYS source and looked under non-qualified annuities, and the taxable portion of the annuity should be excluded. The source doesn't give a date and I am unable to find a credible source that suggests otherwise.

At this point, I would suggest recording the override and mailing the return in.

@MN1957

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MN1957Author

Level 2

Thank you very much!

NotPaidForDebugging

Level 2

Amazingly, this is still not corrected, as of March 2, 2024.
I spent 4-5 hours documenting this problem for Turbotax and on the phone with them.

I received a "case resolved" email - but it's not, and there's no work-around.

This has to be impacting a lot of NY taxpayers - it's not an uncommon situation, and NY tax law is clear, as stated below.

$20,000 Pension and Annuity Exclusion at https://www.tax.ny.gov/pdf/volunteer/ty2018/co-60.pdf

Q: If a retired executive receives periodic payments from a deferred compensation plan that isn’t
considered a qualified pension plan under the IRC, and the payments were considered wages under
IRC 3121(v), do these payments qualify for the $20,000 pension and annuity income exclusion
under Tax Law section 612(c)(3-a)?
A: Yes. The IRS determined that payments received from the nonqualified plan were wages for federal
income tax purposes and were reported on a Form W-2 (only the amount in Box 11 – Nonqualified
plans – is eligible for the exclusion). However, it was ruled that the nature of the payment is intended
to be pension or annuity, which qualifies for the subtraction modification when certain criteria are met.

MN1957Author

Level 2

Thank you for your reply. It was very helpful. I'm surprised it hasn't been fixed either. It shouldn't be too complicated to rectify, since box 11 on the W-2 is the trigger for the exclusion. This issue arose for me in 2020, and I didn't realize it until this year. Fortunately, I caught it before the expiration of the 3 year limit to file an amended return. The workaround I used was to manually input an overide and send in a paper copy of the amended return to NYS.