SunTaxMan Posted March 31, 2011 Report Share Posted March 31, 2011 Client, age 57. Retired on disability and collecting SS Disability, has received 2 1099-Rs from two different issuers: 1. IRA, Dist code 3. Box 1 and 2a filled in. Box 2b checked for "taxable amount not determined." 2. Pension, Dist code 2. Box 1 and 2a filled in. Box 2b NOT checked. ATX is handling both as fully taxable and I don't think either should be. On the 1040 "Filer's Information" worksheet, "Disabled" is checked. Am I missing something? Possibilities I see: On the 1099R worksheet, if I leave box 2a blank, handling is non-taxable (but this does not agree with 1099-R as issued. (accuracy-related penalty possibility?). Enter the 1099-Rs in ATX as issued and use line 21 on the 1040 for a subtraction figure, with explanation on the line 21 worksheet. Thoughts? Quote Link to comment Share on other sites More sharing options...
Kimberly K Posted March 31, 2011 Report Share Posted March 31, 2011 Use 5329 to show the exception code so it will not be taxable, and for the other 1099r with the Code 3 this will be earned income for the client which would qualify for the EIC. Sorry for the fast response, busy as a bee. Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 31, 2011 Report Share Posted March 31, 2011 Client, age 57. Retired on disability and collecting SS Disability, has received 2 1099-Rs from two different issuers: 1. IRA, Dist code 3. Box 1 and 2a filled in. Box 2b checked for "taxable amount not determined." 2. Pension, Dist code 2. Box 1 and 2a filled in. Box 2b NOT checked. ATX is handling both as fully taxable and I don't think either should be. On the 1040 "Filer's Information" worksheet, "Disabled" is checked. Am I missing something? Possibilities I see: On the 1099R worksheet, if I leave box 2a blank, handling is non-taxable (but this does not agree with 1099-R as issued. (accuracy-related penalty possibility?). Enter the 1099-Rs in ATX as issued and use line 21 on the 1040 for a subtraction figure, with explanation on the line 21 worksheet. Thoughts? Without all the information in hand, I will venture to state that both are taxable. He will not pay penalty but he needs to pay taxes at least on the IRA. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted March 31, 2011 Report Share Posted March 31, 2011 Use 5329 to show the exception code so it will not be taxable, and for the other 1099r with the Code 3 this will be earned income for the client which would qualify for the EIC. Sorry for the fast response, busy as a bee. I think the 5329 is only for exception of 10% penalty. right? IRA is taxble unless it was never deducted and you would have a 8606 in return. Quote Link to comment Share on other sites More sharing options...
SunTaxMan Posted March 31, 2011 Author Report Share Posted March 31, 2011 Thanks for the responses. Sometimes it is difficult to see the woods for the trees. As soon as I saw the responses, I realized my error in thinking. Of course, the retirement income is taxable. The disability exception is for the early withdrawal penalty. Thanks for "slapping my fingers." Quote Link to comment Share on other sites More sharing options...
Kimberly K Posted March 31, 2011 Report Share Posted March 31, 2011 See what happens when your brain turns to mush at the end of march, yes both are taxable and yes the 5329 is to reduce or zero out the 10% penalty. OOPS! Quote Link to comment Share on other sites More sharing options...
jainen Posted March 31, 2011 Report Share Posted March 31, 2011 >> 5329 is to reduce or zero out the 10% penalty<< There is no 10% penalty with Distribution Codes of 2 and 3. Quote Link to comment Share on other sites More sharing options...
Kimberly K Posted April 1, 2011 Report Share Posted April 1, 2011 >> 5329 is to reduce or zero out the 10% penalty<< There is no 10% penalty with Distribution Codes of 2 and 3. Oh boy, yes you are correct! Sitting on my fingers until May, when I am not as busy. Quote Link to comment Share on other sites More sharing options...
Cathy Posted April 1, 2011 Report Share Posted April 1, 2011 Did your client have any non deductible IRA's in the past? Can't assume any IRA is 100 per cent taxable. Having fun yet? Quote Link to comment Share on other sites More sharing options...
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