rntax

Would the IRS question as to why box 2a on 1099R shows 50k as taxable amount and 1040 does not have any amount as taxable? Should there be an explanation submitted somewhere?

According to info from the NYC pension site, they are required to issue a 1099 when the term of repayment is greater than 5 years(which of course this is). However there is an exception to taxibility if the proceeds are used to purchase a home.

From NYC Police Pension Fund website:

Principal Residence Exception

Internal Revenue Code 72 (p) (2) ( (ii) provides an exception to the five-year rule mentioned in “Loan Taxability” above if you use the loan to purchase a principal residence. If you can demonstrate that your loan falls within this exception, the IRS will allow you to defer the tax payable on the loan. PPF is required by law to send you IRS Form 1099-R for this loan.

I know he hasn't defaulted on the loan because it was taken out in November and the payments are taken right out of his paycheck.

With this in mind I can't think of any other way to make the 50k non taxable on the return.

Thanks Catherine, I'll enter the IRC code and back out the 50k on the other income line.

Thanks again.

I just had the same thing happen. I did the same as you. It was on the 1040 Third Party Designee area. I cleared all boxes and checked the "yes" box and entered PREPARER. Hoping for the best.

Client is a NYC Police Officer. He took a LOAN from his qualified pension plan of $50k and used the proceeds for the purchase of a new home. He received 1099R with $50K as taxable income and code 1.

As per IRC 72 (p)(2)B(ii) he can defer the taxes on the distribution, so the amount would not be taxable now. I input the 1099R and of course the amount goes to 1040 but I can't figure out how to elimenate it from there. Do I override it and attach an explanation? And if so can the return be efiled with the explanation?

Any help would be greatly appreciated. Thanks