I have a client with a CSA 1099-R. The gross distribution is for 12,312. The Box 2a Taxable Amount shows "Unknown". Box 5(Emp contributions etc) shows 2,226.80. It seems to me that the taxable amount would be the net 10,085.20. The previous accountant picked up the gross amount as being taxable. Anyone had any experience with this 1099?
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Box 5 is "Employee Contributions/Designated ROTH Contributions or Insurance Premiums" right? Does the CSA 1099-R have anything in box 9b "Total Employee Contributions"? I believe box 5 on these is a potential Schedule A medical deduction.
If there's something in box 9b you'd probably use the simplified method worksheet (depending on when they retired) to see how much of that applies to the current year. If 9b is blank, I'd expect the full amount to be taxable. -
This sound like U S civil service. Used to be when one retired he had to manually compute the excluded amount for each month of retirement, hence not all of gross would be taxable. Depending on what year he retired, calculations were different, however for most recent years the old simplified method applies. See publication 721 (?) the one for civil service. The simplified method is also probably treated in publication 575.ChEAr$,
Harlan Lunsford, EA n LAComment
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Information only
I have a couple of clients receiving those documents, to include the fairly recent extra box 9b information.
So far as I (we) can tell, they are reporting medical insurance premiums or something similar. For my clients, "year #1" is somewhere in the recent or distant past.
As for netting out the current year gross income and the full "contributions" number each (or any!) year, that is dead wrong. The real "contributions" are only relevant in the first year, and afterwards the calculations are repeated using the (continuation of) simplified method. Your tax software should pretty well come up with the correct taxable amount, using the simplified method, assuming everything was entered correctly in year #1.
Only the government could send out such a confusing document.
FEComment
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The newer ones I've seen do calculate the taxable amount. So this guy's probably been retired quite a long time, and there's no way to determine how much, if any, was calculated in the past. When I was doing TurboTax audit's I'd see the gamut from reported as fully taxable to fully non-taxable (and wrong nearly all of the time). And if they retired a really long time ago, all basis was recouped in the first three years and so it was fully taxable. Then there was a choice of method you could use, but for the last 20 years or so, only the simplified method is available.
Since it's unlikely the client has any clue what has been or not been recouped, I'd look at it as 'basis unknown' which, like with stocks, IMHO is fully taxable. But you might want to ask the client a few questions about it.Comment
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Simplest route may be the best
We are definitely showing our age if we make reference to the antique "three-year rule."Originally posted by joanmcq View Post
I have one client (Postal Service) who retired many years ago, and each year I have to "add another year" to the worksheet for used/remaining/whatever numbers. It's rather painless...but the annual Form 1099-R still shows a blank for taxable amount.
OTOH, another client retired from a USDA job within the last couple of years. As noted, there IS a "taxable amount" shown on the Form 1099-R. The first year I tried to match (check?) the taxable amount shown with the relevant information shown ("contributions", age of client/spouse, etc) and we never came close to the taxable amount. Client even called and tried to get some numbers...total confusion. Now there is a number in the information/basis box each year...but I just ignore it, use the stated taxable amount, and move onward.
I guess it is probably prudent, absent any other reliable information, to make the retirement distributions fully taxable.
FEComment
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One other possible fly in the ointment. If recipient of U S civil service retired on disability before normal retirement age (57; used to be 55) then all is taxable until the month he reaches normal retirement age.
Note description of the payments.ChEAr$,
Harlan Lunsford, EA n LAComment
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Anyone that retired while the jumble of possible treatments was in effect will always have UNKNOWN as the taxable amount. Like an IRA custodian, the issuer has no idea how much basis has been used already.Originally posted by FEDUKE404 View PostWe are definitely showing our age if we make reference to the antique "three-year rule."
I have one client (Postal Service) who retired many years ago, and each year I have to "add another year" to the worksheet for used/remaining/whatever numbers. It's rather painless...but the annual Form 1099-R still shows a blank for taxable amount.
OTOH, another client retired from a USDA job within the last couple of years. As noted, there IS a "taxable amount" shown on the Form 1099-R. The first year I tried to match (check?) the taxable amount shown with the relevant information shown ("contributions", age of client/spouse, etc) and we never came close to the taxable amount. Client even called and tried to get some numbers...total confusion. Now there is a number in the information/basis box each year...but I just ignore it, use the stated taxable amount, and move onward.
I guess it is probably prudent, absent any other reliable information, to make the retirement distributions fully taxable.
FE
I'm not that old, but I had to study this stuff in order to attempt to defend the TT audits. So I made sure I had a section on these in the retirement tax class I taught.Comment
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