RE: STATE TAXES...I took early disbursement of a pension plan (Total distribution).

 I have a 1099-R.  Box 1 and 2a are the same.  TurboTax is asking for "BASIS OF RETIREMENT INCOME"  What is that?  What should I enter?  Box 4 on the 109-R says I paid Federal Tax when I cashed out of the pension, but I don't see that I paid any state tax (nothing in box 12).  I lived in the same state at the time of contributing and the time I cashed it out.

My company spun out of another company.  Pensions ceased with the new company.  THere was hardly any money in it, so I cashed it out.
  • I should also mention this in a PA State Return.
  • I am having the same issue.  Did you ever figure it out?
  • I've been waiting for 40 minutes to talk to a "tax expert" from Turbo Tax and haven't figured out what this basis thing is.  I withdrew money in another year and this was never asked for.
  • Basis is what you personally contributed to your pension plan.  These are called "contributory" plans and they are common in the government sector where both the employer AND the employee make contributions.  If you have a plan where all of the deposits were made by your employer, you have NO basis.
  • This is what the IRS webpage says about box 5 of the 1099-R:

    Box 5.
    Generally, this shows the employee’s investment in the
    contract (after-tax contributions), if any, recovered tax free this year;
    the portion that is your basis in a designated Roth account; the part
    of premiums paid on commercial annuities or insurance contracts
    recovered tax free; or the nontaxable part of a charitable gift annuity.
    This box does not show any IRA contributions. If the amount shown
    is your basis in a designated Roth account, the year you first made
    contributions to that account may be entered in box 11.

    Could this mean that the "basis" is shown in box 5 of the 1099-R?

To report income from a 1099-R

Go to Federal Taxes

Wages & Income

Easy Guide

Retirement Plans & SS

IRA, 401(k), Pension Plan Withdrawals (1099R)

Click Start Box.

1099-R’s come in two versions. In the first version both box 1 and box 2a contain #’s. This means that the plan custodian has the information necessary to determine the portion of the gross distribution that is taxable. Enter both #’s, even if they are the same, and TT will put the amounts on your tax form on Lines 16a & b.

In the second version, box 2a contains the word “unknown” and box 2b is checked, meaning that the taxable amount is not determined. Once you indicate that (1) the funds are not from an IRA and (2) are not being rolled into another IRA account, TT will ask you when you started getting the payments and what is the “plan cost”; that is, the funds that you contributed.

TT will then ask you (1) if the annuity is covers more than one person and (2) your age when the payments started. Based on your answers to all of these questions, TT will compute the taxable amount that should have been in box 2a.

By the way, you only have to enter all of this information once. TT will include it in the data that it carries over each year.

Finally, play close attention to the Box 7 distribution code #. For example, this is where the plan custodian will indicate if the distribution is exempt from the 10% early distribution penalty.

  • I'll try this, but I'm now in the state tax section (PA).  It is specifically asking me for 'basis of retirement income."  The federal section is done and there seems to be no problems there.  It is only the State taxes (PA) that I'm having an issue.
  • I am having the same problem.  The PA State Tax is being calculated by Turbo Tax as $0, and I have had $0 with held on the 1099-R. I too cashed out a 401-K from a previous employer.  Is this correct that I don't have to pay any taxes to PA?  It just doesn't seem right?!
  • I can 't say for sure that I'm right, but my research indicates that in PA you pay taxes on your contributions as they go in - therefore no PA taxes when you cash out.  Feds don't tax going in - they tax when you pull out.  I guess different states have different rules - but, as I said, in PA you pay as you contribute.  
    Hopefully someone else can verify this.
  • What amount am I supposed to put in there?  I keyed in the amount that I took from my 401K and it said I didn't owe anything.  With nothing keyed in there for the "basis of retirement income", I owe 322.00.  I know the state taxes were not deducted from it so i know I owe something, I just don't know what to put in there.  It won't let me leave it blank.
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