To Enter Form 1099-R in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- IRA/Pension Distributions (1099R, RRB-1099-R)
- (If the tax document is a RRB-1099-R, click here for the next steps.)
- Enter the Payer's EIN from the Form 1099-R along with the Employer's Name, Address, and Zip Code. (The City and State information will fill in automatically).
- Enter the amount from box 1, Gross Distributions, into box 1 on the Form 1099-R window.
- Enter the taxable amount in box 2a.
Reporting A Rollover - If all or part of the distribution was rolled over:
- Reduce the taxable amount in Box 2a by the amount that was rolled over. If the entire distribution was rolled over, enter 0 as the taxable amount.
- You will be asked, Was all/part of the distribution rolled over? Answer YES and enter the amount of the distribution that was rolled over. This amount will transfer to Box e "Amount Rolled Over".
For additional information see Form 1099-R Rollovers, Penalties, and Exclusions below.
Determining the amount of the taxable income:
General Rule - The general rule must be used to determine the tax-free portion of a distribution from a nonqualified plan, commercial annuity, and a qualified plan that cannot or does not choose to use the simplified method. Under the general rule, the amount of each payment that is more than the part that represents the net cost is taxable. The part that represents net cost equals the same proportion that the investment in the contract is to the expected return.
Simplified Method - For qualified plans with a start date after July 1, 1986 and before November 19, 1996, the taxpayer could have chosen to use either the simplified method or the general rule. For qualified plans with annuity start dates after November 18, 1996, the simplified method must be used if one of the following is true:
- Participant is under age 75 on the annuity start date, or
- The participant is entitled to less than five years of guaranteed payments.
Nonqualified plans cannot use the simplified method. Under the simplified method, the tax-free part of each annuity payment is figured by dividing the cost basis by the total number of anticipated monthly payments. For an annuity that is payable over the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. For any other annuity, this number is the number of monthly annuity payments under the contract.
To access the Simplified Method Worksheet:
- Check the box labeled SGR, located to the right of Box 2a.
- You will be asked Would you like to use the Simplified General Rule Worksheet?
- Select YES
- Enter the information relating to the annuity into the Simplified General Rule Worksheet
- If any federal taxes have been withheld, enter the amount in box 4.
- Look carefully at box 7, Distribution Code, on the Form 1099-R. This code will determine if the distribution is taxable and if so, how to report it on the tax return. To see a list of the Distribution Codes and what they represent, click here. In most cases the distribution code will be either 1 or 7. If it is code 7, Normal Distribution, no extra steps are needed. If it is code 1, a message will appear asking which part of Form 5329 you would like to carry the taxable amount to. If the entire amount of the taxpayer's distribution is subject to an early withdraw penalty, select option 3. If part of the distribution was rolled over, select option 1. If the distribution was from a Coverdell education savings account or a qualified tuition program, select option 2. If any amount of the distribution qualifies for a penalty exclusion see below
- From the Form 5329 Transfer Option window, select YES when asked Does the amount being carried to Form 5329 qualify for any penalty exclusion?
- Choose the reason for exclusion from the list. If their exclusion is not listed, but the taxpayer IS entitled to claim an exclusion, select Other.
- Enter the amount that qualifies for that particular exclusion
- Next, enter the state information from the Form 1099-R form into line 10 of the Form 1099-R window. If there are multiple states on the Form 1099-R, enter the second state's information on line 11.
To edit a Form 1099-R / Form RRB-1099-R, from the Main Menu of the tax return (Form 1040) select:
- Income Menu
- IRA/Pension Distributions (1099R, RRB-1099-R,8930)
- Select the entry and select Edit or double-click the entry you wish to Edit.
- Adjust the information as needed.
To delete a Form 1099-R / Form RRB-1099-R, from the Main Menu of the tax return (Form 1040) select:
- Income Menu
- IRA/Pension Distributions (1099R, RRB-1099-R,8930)
- Select the entry and select the Delete
- You will be asked to confirm. Select YES.
Form 1099-R Rollovers, Penalties, and Exclusions
Rollovers - If your client received a Form 1099-R for a distribution, that was rolled over into another qualified account within 60 days, it is not considered taxable income. The IRS keeps track of any "trustee-to-trustee" transfers that are made with tax-deferred retirement accounts, so it is important to accurately report the amount that was transferred and the amount that is taxable.
Box 1 of Form 1099-R shows the total amount of the retirement fund that was distributed to the taxpayer. The taxable amount of the distribution is shown in box 2a. For direct rollovers from one qualified plan to another, this amount is generally zero. For other rollovers, the amount in box 2a may be the same as the amount in box 1. The taxable amount will need to be changed to reflect the amount that was rolled over after the distribution. (Subtract the amount that was rolled over from the distribution amount in Box 1).
The distribution code in Box 7 explains to the IRS the circumstances as to why the distribution was taken. Direct rollovers to another qualified plan are coded with the letter G. This includes transfers to another company's 401(k) plan, a tax-sheltered 403(b) annuity, a government 457(b) plan, or an IRA. For additional information on how to report in the TaxSlayer Pro program see To Enter A Form 1099-R Entry above.
Penalties - To discourage the use of pension funds for purposes other than normal retirement income, the IRS imposes an additional 10% tax on certain early distributions of these funds. If a taxpayer receives a distribution before age 59 1/2 (usually designated by distribution code 1), they may be subject to an additional tax on their early distribution unless an exception applies. Early distributions are those received from a qualified retirement plan or deferred annuity contract before reaching age 59 1/2. The term "qualified retirement plan" means:
- A qualified employee plan such as a 401(k) plan
- A qualified employee annuity plan
- A tax–sheltered annuity plan for employees of public schools or tax–exempt organizations
- An IRA other than an education IRA
If you have an early distribution from a SIMPLE IRA plan within the first 2 years of participation in the plan, the additional tax is 25%
To calculate the penalty, use Form 5329 and carry the amounts to Form 1040. Even if the taxpayer qualifies for a full penalty exclusion, Form 5329 must still be filled out, and an exclusion can be added to reduce the penalty. For additional information on how to report in the TaxSlayer Pro program see To Enter A Form 1099-R Entry above.
Exclusions - The following exclusions apply to distributions from any qualified retirement plan. If all or part of the early distribution was received for any of the following purposes, that portion of the distribution would not be subject to the 10% penalty:
- Qualified retirement plan distributions if you separated from service in or after the year you reach age 55 (does not apply to IRAs)
- Distributions made as a part of a series of substantially equal periodic payments (made at least annually) for your life or the joint lives of you and your designated beneficiary
- Distributions due to total and permanent disability
- Distributions due to death (does not apply to modified endowment contracts)
- Qualified retirement plan distributions up to (1) the amount you paid for unreimbursed medical expenses during the year minus (2) 7.5% of your adjusted gross income for the year
- Qualified retirement plan distributions made to an alternate payee under a qualified domestic relations order (does not apply to IRAs)
- IRA distributions made to unemployed individuals for health insurance premiums
- IRA distributions made for higher education expenses
- IRA distributions made for the purchase of a first home (up to $10,000)
- Distributions due to an IRS levy on the qualified retirement plan
- Qualified distributions to reservists while serving on active duty for at least 180 days
If all or part of the distribution qualifies for a penalty exclusion see To Enter A Form 1099-R Entry above to report in the TaxSlayer Pro program.
NOTE: This is a guide on entering retirement income into the TaxSlayer Pro program. This is not intended as tax advice. For additional information refer to the Additional Information below.