ProWeb: How Do I Enter The Simplified General Rule Worksheet? – Support

When there is a distribution from a retirement plan that has received after-tax contributions, Form 1099-R Box 2b "Taxable amount not determined" will generally be checked. If a taxpayer receives Form 1099-R with Box 2b checked, it is their responsibility to determine the amount to be taxed. If the distribution is from an annuity and the annuity starting date was after July 1, 1986, the taxpayer may be required to use the Simplified Method Worksheet available on the 1099-R Input Screen in TaxSlayer ProWeb.

Background

Contributions to a retirement plan, such as to a traditional IRA, 401(k), and 403(b), are generally made with pre-tax earnings, income that hasn't been included in the taxpayer's gross income. However, a taxpayer that has also contributed "after tax" dollars to a retirement plan can exclude part of the retirement distribution from taxation since it has already been taxed.

When the payments from a pension first begin upon retirement, the tax-free portion must be calculated. The tax-free portion generally remains the same each year, even if the amount of the total payment changes. The total amount of the pension or annuity that can be excluded from income is limited to the "total cost" of the pension, also called the "basis" or "investment in the contract".

In general, the taxpayer's "cost" is the net investment in the contract as of the annuity starting date, or the date of distribution, whichever is earlier. To find the "cost", the taxpayer must have a record of the total premiums, contributions, and other amounts paid to the plan. This also includes the amounts paid by the employer that were taxable when paid. The plan "cost" does not include amounts withheld from pay on a tax-deferred basis, that is, money that was taken out of gross pay before taxes were deducted.

Program navigation

To access the Simplified General Rule Worksheet in the individual income tax return in TaxSlayer ProWeb, from the Federal Section select:

Select Income
Select Form 1099-R,RRB,SSA
Select Add or Edit a 1099-R - Select the 1099-R to edit or select Add a Form 1099-R to add one.
Between Box 2a Taxable Amount and the 2b Taxable amount not determined check box, you'll see "Are you a public safety officer, made a qualified charitable contribution (QCD) or need to use the simplified worksheet to calculate your taxable amount?" Click the "Click here for options" link.
Select to begin the Simplified Method Worksheet. Read the qualifications to ensure the taxpayer is eligible to use the simplified method, and if so select Continue.
- Plan cost at annuity start date - The plan cost at annuity start date is the total after tax contributions in the plan (may be shown in box 9b of the 1099-R). If the taxpayer did not make any after tax contributions, leave the entry blank.
- Starting date of annuity - The annuity starting date is the later of (a) the first day of the first period for which the taxpayer received a payment, or (b) the date the plan's obligations became fixed.
- Death benefit exclusion (if any) - If the taxpayer is the beneficiary of a deceased employee or former employee who died before August 21, 1996, include any death benefit exclusion they are entitled to, up to $5,000 maximum. (This amount will be added to the plan cost at annuity start date.)
- Check here if the annuity benefits are based on the life of the annuitant and a beneficiary - Check the box if this is a joint or survivor annuity.
- Combined calculated age of annuitants at start date - The program will calculate the age.
- Adjust the calculated age of annuitants, if its different - If there is a need to adjust the calculated age, you can enter a positive or negative number here.
- Number of months paid in 20xx - Enter the number of months the taxpayer received payments during the current tax year.
- Amounts previously recovered - Enter the amount that could have been recovered tax free in prior years even if not claimed. Look at last year’s tax return to find this amount.
- Public Safety Officer Exclusion for Health Insurance Premiums - An eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew who is retired because of disability or because they reached normal retirement age) can elect to exclude from income distributions made from their eligible retirement plan that are used to pay the premiums for coverage by an accident or health plan or a long-term care insurance contract. Enter the amount paid for the premiums, up to a maximum of $3,000.