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1402(k) exclusion for retired insurance agent payments

Level 1

I have a client who received her "retirement" payments on a 1099-NEC, almost $80K.  Doing research, she qualifies under Sec 1402(k) to exclude the payments from SE tax.  Does anyone know how this is to be entered into Lacerte?  I've tried searching, but cannot figure it out and nothing comes up in the search.  

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3 Comments 3
Level 15

Here is the help article:



"Level Up" is a gaming function, not a real life function.
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Level 15

Paging Bruce ( @Skylane )  our resident insurance expert.

If this payment truly IS exempt from SE tax (not my area of expertise...)  and you can't get the F.1099 changed; my suggestion is to enter it on Screen 14 as SE income, back it out with an explanation, the enter again on Screen 14 as 'other income'.  

That allows the IRS to do their matchy matchy drill 😉

"*******Tax software is no substitute for a professional tax preparer*******
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Level 15

Every time someone posts a "trick the IRS computer" procedure, I have to disagree because doubling the gross income on a return is also likely to double the likelihood of an audit.  

Or maybe it will quadruple the likelihood of an audit.  Or maybe it makes no difference.  I'm just not going to sign a return that says a client is self-employed, when he isn't, and in fact is arguing against it elsewhere. 

But what's important here is that there are many hoops to jump through to qualify for 1402(k).  Insurance companies have an army of lawyers and accountants to make sure they don't get in trouble with IRS.  Your client doesn't.  He only has you, and the least you (or your client) should do is ask the company for documentation of why they are using the 1099-NEC.  

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