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1099R
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10409000
Level 4
04-02-2022
01:12 PM
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I have a client that retired from military early due to disability. He works and also receives a 1099R the 1099r shows code 7 normal distribution and box 2 shows taxable amount. He is telling me that his friends that are on disabilty exclude the 1099R from their taxes. I told him that the only thing im aware of is that i have a law enforcement client that is disabled and retired and not working.. and the codes on his 1099R are labeled as 3 disability and box 2 shows 0 taxable income. So i told him to maybe speak with his retirement company to see if they can make that change.. but he is wanting me to manually exclude it due to a publication he read pub 525. anyone have any information they can share with me on this is appreciated.
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3 Comments 3
qbteachmt
Level 15
04-02-2022
01:29 PM
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Who issued the 1099-R? You stated he has lots of things going on. What type of retirement is that from? What about that disability:Temporary disability? Combat? 100% or less?
For military retirement, you first need to know how it is computed.
"If you retired under a disability law (Temporary Disability Retirement List or Permanent Disability Retirement List), your retired pay will be fully non-taxable if your pay is calculated based upon your military (not VA) disability percentage and you meet one of the following conditions"
"The welcome letter you received from DFAS when you first retired indicates whether your pay is computed using your military percentage of disability or your years of service."
From: https://www.dfas.mil/RetiredMilitary/manage/taxes/isittaxable/
And you can read Pub 525: https://www.irs.gov/publications/p525
He might not realize his 1099-R is right, and his friends have different circumstances and codes.
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taxes96786
Level 9
04-02-2022
03:37 PM
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I would explain that you are not willing to jeopardize your tax profession by doing something you know to be wrong. That the 1099 has to be reported as it is presented or changed by the payee. I would also suggest that he physically look at a copy of the friend's 1099 to see what the disposition code is. You could also ask how much tax training he has.
Worst comes to worst you can fire him as a client.
