Can I correct the taxable amt of my pension on the state return? 1099R says UNKNOWN. Simplified method is used, but the state shows only the total amount.

Forum|Forum|5 years ago
March 8, 2021
2 replies
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This is only a problem with state. They bring over the gross distribution for both gross and taxable amounts. I need it to subtract some for the taxable portion. Not the first year this has not worked for Arkansas.

TurboTax Premier Online

Best answer by BillM223

So since I am using the online version, there is no way to override this? The spouse distribution code on the 1099R is and always has been 3. Retired on disability but now past the minimum retirement age. Somehow this worked fine in 2019, but in 2018 I had the same problem. In 2018, the federal worksheet Distributions from Pensions, IRAs, etc. left line 2a Taxable amount blank and then carried over the gross distribution amount to the Arkansas Pension and Annuity Worksheet as both the gross and the taxable amount. That is what TT is doing again in 2020.

In 2019, the federal worksheet Distributions from Pensions, IRAs, etc. line 2a Taxable amount was NOT blank and had the correct taxable distribution amount. Line 18B of the Arkansas return listed correct amounts for gross and taxable amount, then subtracted $6,000 for the final amount in column B.

It looks to me like TT has put back in the programming error that caused this to be handled incorrectly in 2018 and was fixed for 2019. Am I wrong?

"So since I am using the online version, there is no way to override this?"

Correct. I have looked at the Arkansas interview and do not see a way to put a random adjustment into the state return (this is one way we "adjust" the state taxable income in other states). Unfortunately, all the adjustments that I see are for particular situations, and might cause more trouble than it is worth to try it.

"In 2019, the federal worksheet Distributions from Pensions, IRAs, etc. line 2a Taxable amount was NOT blank and had the correct taxable distribution amount. "

I have programmed for 30+ years, and a change of input can certainly cause a change in output, even if one result is not correct.

"It looks to me like TT has put back in the programming error that caused this to be handled incorrectly in 2018 and was fixed for 2019. Am I wrong? "

I have no way to know this. I am not part of the Development Team at TurboTax.

Thank you for the token. I have packaged up the token with a description of the problem and have submitted it upstream. However, given the fact that Congress, the IRS, and the states are "moving the goalposts" on almost a daily basis causing a huge amount of work that shouldn't have been necessary in a normal year, it is not likely that this issue will be addressed in the short run.

So you have three choices that I see:

File as-is and eat the small extra tax.
Print the return, manually edit the numbers on the Arkansas form(s), and mail the state return with a copy of the federal (NOTE: since your State And Local Taxes are capped at $10,000 on Schedule A, changing your Arkansas return will not change your federal return).
Buy a copy of the CD/download software and transfer your online tax file to it where you can override the number in doubt (in case I did not note this before, this will likely invalidate the Tax Accuracy Guarantee).

I am sorry I don't have better options for you. Thanks for your co-operation.

ReneeM7122

Yes, you can correct the taxable amount of your pension on the state return.

To get the State pension deduction, you will first have to enter the necessary information in your Federal Income tax return and then in the State income tax return.

Here are the steps to enter your exempt State employee pension:

On the Federal Income Tax portion:

In the search or find box, type in 1099-R
Click on Jump to 1099-R
Scroll down to Retirement Plans and Social Security
At IRA,401(k), Pension Plan Withdrawals (1099-R), click Start (or Update)
Enter your 1099-R or if you have entered it, click on Edit then Continue
Answer the next questions until you get to the Where Is This Distribution From? screen
Select the source State Employees and enter the information requested:
Click on Continue
Click on From a Qualified Plan
Continue answering the questions

On the State return portion:

At the Changes to Federal Income page, scroll down to Received retirement income, click Start (or Update)
At the Retirement Distributions Summary page, click on Edit State
If no additional information is required, click on Continue
Click on Done

Here is a TurboTax article about retirement.

patzooAuthor

It is NOT an exempt state employee pension. It is a federal employee pension with the taxable amount showing unknown. I KNOW what the taxable amount is, but it is not on the 1099, you have to go through the simplified method worksheet to figure it out. The state return puts the gross distribution for the taxable amount. That is what I need to change.

BillM223

I ran a test for Arkansas with a simple pension and some made up numbers to force the Simplified Method to reduce the taxable amount on the federal return. (i.e., a $10,000 gross distribution showed only $9,714 as taxable).

The $9,714 taxable amount appeared on line 5b on the 1040 (line 5a had the $10,000).

I indicated that this pension was "Employer-sponsored pension plan or qualified IRA" to make it eligible for the $6,000 Arkansas exemption.

This gave me a gross distribution of $10,000 and a Taxable amount of $9,714 on line 18A on the AR1000F, as a result of $3,714 when the $6,000 exemption is factored in.

Based on your comments, I am pretty sure that this is not what you got. So please tell me what you entered on the 1099-R - especially box 2a - and what you checked as to the type of pension, and what you got on line 18A on your AR1000F.

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rpdilustro

Go to IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits, Worksheet A. Follow the directions for success. I was lucky to talk to a guiding light from the IRS.