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The 10% early withdraw rule doesn't apply to military retirement. TurboTax asks "Did you receive any of this money before you turned 59 1/2? A "yes" cuts my refund. Why?

Forum|Forum|5 years ago
January 8, 2021
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TurboTax Deluxe Online

Best answer by Critter-3

Thank you ALL for your help. I was surprised when I woke up (I live in Hawaii) to see how much effort you guys had put into this. To help troubleshoot, here are more details:

1) I am using the online version of TurboTax.

2) I've been receiving retirement pay for 12 years, all my 1099Rs have a 7 (and only a 7) in box 7.

3) I turned 60 in Aug 2020.

4) My 1099R basic info was carried over from last year's online TurboTax return, so I took the suggestion of deleting the 1099, rebooting and reentering. I still get a the penalty if I answer truthfully to the 59.5 question.

From your comments, it seems TT has a issue with the online version. I won't have all my PW until Feb, so maybe it will be fixed by them. Do any of you have an "in" with TT to get this corrected? I saw one mention that it had been reported, but with some portion of the military retiree population turning 60 this tax year, this should be impacting at least a few hundred (many more?) retirees. I want to see it fixed for me and them.

Thanks again to all! TurboGreg in Hawaii (USAF Retired!)

The TT moderators do monitor this forum but I did mark this thread for review. But I am certain this is due to the incomplete program ... look again in Feb closer to when you are ready to file.

SteamTrain

Employee

Not sure

....I've worked thru the form Q&A 6 ways from Sunday for a 55 year old, and I can't get the penalty to show up unless I have a Code 1 in box 7 (which it wouldn't be for a normal Military retirement, even if under 59.5....might also happen in certain situations if you accidentally checked "IRA/SEP/Simple" box in the main form. )

_______________________________________

You really have that 2020 military 1099-R form already ? Don't wing it, wait for the form and enter it carefully.

AND....If you get a question in the follow-up pages about whether it is a Qualified, or Non-qualified retirement plan.....Military 1099-R forms are for Non-qualified plans.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

T

turbogreg1Author

Thanks. Yes, military retirees already have their 1099-Rs. I have a straight-forward 1099-R from Defense Finance and Accounting Service, code 7 in Box 7, IRA/SEP/SIMPLE box on this 1099-R is blank, picking non-qualified on that screen, nothing else special about the 1099-R or me. Had 2 months fall under the 59 1/2 status. When I answer "yes" to the question "Did you receive any of this money before you turned 59 1/2?". I see my status change from getting all $2K of paid tax back (This is the only income I've entered this early), to owing $700+. If I lie and say "no" to the "Did you receive any of this money before you turned 59 1/2?", I get all my tax back. TurboTax may have their coding wrong.

Critter-3

If this is a code 7 distribution then I think you went down a wrong path somewhere since you should not be seeing any of those questions ... I recommend you delete the 1099-R then close out of the program and reboot the computer. Then log back in and re enter the 1099-R again and pay close attention to the follow up questions. The retirement should be taxable but no penalty applied so you don't need to answer any penalty forgiveness questions at all .

B

BigChief7102

Okay, well, the response from TurboTax WEEKS ago was, "The IRS isn't taking returns until February 12th, so keep checking back." Well, it's February 15th now, and this online filing software issue STILL isn't fixed. I've been using TurboTax for the last 5 years. Some IT fool has apparently made changes to their software within the last year and screwed everything up for military retirees. I'm moving on to a different online tax filing service!

T

turbogreg1Author

@BigChief7102 check your answers. They fixed it and I filed already. Military retirement should have a 7 in box 7 of your 1099 and retirement is a non-qualified plan. I forgot what they changed the question too, but I no longer had to lie about “did I get any of this money before I turned 59.5”. I was able to answer yes (I turned 60 last August) without a big tax hit. So in the end, it looks like it was fixed. Check again and good luck.