distribution from Non Qualified plan not getting picked up as taxable by TT?

Forum|Forum|3 years ago
March 3, 2023
2 replies
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For years I've been receiving a W-2 for annual distribution from a non-qualified plan and it gets picked by TT as wages on line 1a of 1040. On my W-2 the amount shows up in both Line 1 and Line 11. This year, there's a new question in TT that asks the question that I have cut & paste at bottom of this post.

If I answer "yes" (which is correct), the amount is not included in income on my 1040. If I answer "no" which is incorrect, the amount IS included in income. It looks like I have to answer the question incorrectly to get the right result on my 1040? Here's the question:

Did you take money out of your nonqualified pension plan?

We just need to check whether the $xxxx in box 11 is money you contributed to your plan, or if it's money you took out of your plan.

Yes, I took this money out of my nonqualified or Section 457 plan.

No, this is money I contributed to my nonqualified or Section 457 plan.

ThomasM125

I assume the distribution is showing in box 1 and box 11 on your W-2 form. If you answer "yes" to the question indicating that you took a distribution, the distribution amount will be removed from your wage entry on line 1 of form 1040, and it will be entered on line 8(t) of schedule 1 (Additions to Income) and as such it will appear as other income on your tax return. That may be why you say it is not included on your form 1040, because you don't see it in line 1, but it is in line 8 of your form 1040. So, it is not being eliminated, just reclassified. So you should answer yes to that question.

You can view your form 1040 and schedules 1 to 3 while working in the online version of TurboTax by following these steps:

Click on Tax Tools in the left menu bar
Click on Tools
Look under Other Helpful links….
Choose View Tax Summary
Look in the left menu bar and choose Preview my 1040
Scroll down the page to see form 1040 and schedules 1 to 3

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pfbeginAuthor

i had seen another post on this topic and the person reported that his return was rejected because his W-2s did not tie out to line 1a. Apparently this is resolved now because i just filed as you suggest (using the line 😎 and my return was accepted. Thanks!!!

mrayak

I have tried the suggestion by selecting “yes” for distribution and entering the same amount in the required state box that populates. After doing so I get an error message in the federal review that “ the total amount of section 457 state distributions does not match with the amount of section 457 distributions reported on the federal return, adjust the state entries as needed” even though the amounts are the same. Please help if possible. Thanks. the total amount of section 457 state distributions does not match with the amount of section 457 distributions reported on the federal return, adjust the state entries as needed

AnnetteB6

The situation you described regarding an error flagging state distributions from a 457 account is a known customer experience that is being addressed by the TurboTax development team. It is expected to be resolved after 2/2/2024.

@mrayak

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PADenny

I am having a somewhat related issue. I have been using TurboTax for many years and this is the first year that I am receiving an error message regarding a W-2 for monthly payments received from a nonqualified pension plan. The W-2 contains exactly the same information for 2023 as in past years. The payments are taxable for Federal purposes, but not for Pennsylvania (where I reside). The W-2 contains "PA" and the employer number in Box 15, and $0.00 in both Boxes 16 and 17.

I am receiving a Smart Check error message stating:

"Form W-2 (XYZ Corp.): Nonqualified Distribution (State ID) does not match with any states entered in Box 15.

Nonqualified Dist (St ID) PA"

I have tried not entering anything in boxes 15 - 17 in TurboTax; entering information in box 15 but leaving boxes 16 and 17 empty; and entering the information in all 3 boxes (15 - 17) in TurboTax. The error message was received under all 3 of these approaches.

Thoughts on how to address this error message?