Postal Pension 1099-R

[RRadillo]

Can someone tell my why ProSeries ignores box 5 for Employee Contributions? Govt website (opm.gov) makes it very clear this amount is not taxable but I can't make ProSeries deduct it if I enter everything exactly as it is on the 1099-R. I finally just entered the box 2a (taxable amount) figure myself. The 1099 itself does not specify an amount for this box. It just says "Unknown."

[poolcleaner]

Depending on when the clients retired that employee contribution may have been utilized in the first 3 years after the employee retired.

[rbynaker]

It's been quite a while since I've seen an OPM 1099 with UNKNOWN.  Is this a CSA 1099R or a CSF 1099R?  A = original annuity, F = survivor annuity.

If it's A they probably would have retired a long time ago and already recovered the basis so it's likely 100% taxable.  If it's F then the survivor steps into the shoes of the deceased and continues to recover the same fixed dollar amount of basis each year.

Box 5 though, has nothing to do with it.  All the box 5 numbers I see are Insurance Premiums (if you keep reading, the box is titled "Employee Contributions/Designated ROTH Contributions or Insurance Premiums).  This is where OPM puts insurance premiums.  Basis recovery is based on the 9b Total Employee Contributions which are recovered over the life expectancy of the annuitant based on the age at retirement.

For the insurance premiums, I always get the annual notice of adjustment which can also show things not included in box 5 such as LTC insurance premiums.  Even for clients who do not itemize, they can get a state tax break for these here in VA.

Rick

Edit: Another thought, is there a note at the bottom of the form about distributions to a former spouse?  That can happen sometimes too and leave you stuck with UNKNOWN.

[RRadillo]

He retired in 2018. The 1099-R says CSA. Total contributions from Box 9b is 95,538. None of this has been recovered. I looked at the annuity adjustment letters for the last two years and the box 5 amount is very close (but off by about $120) to the amount he is being charged for a health insurance plan. So it looks like there should be some deduction each year for the basis that is not appearing anywhere.

[rbynaker · Accepted solution]

Depending on what was reported on prior tax returns you may want to amend back to 2018.  On the 1099-R Wks I think if you scroll down to the bottom (might be "page 3") there's a worksheet you can use.  You need to know the retirement date.  Pub 721 is your "go-to" for this.  The worksheet on pdf page 28 is what the software mimics.  You'll have to manually accumulate and enter the "amount previously recovered" for the prior years up to the current year but it should carry forward with you once you have it in there.

https://www.irs.gov/pub/irs-prior/p721--2020.pdf

There's usually a 1-month lag in insurance so it's not always 12 months x monthly amount.  It'll be 11x + 1y = total.  That's one reason for the minor annual discrepancy.  I don't remember offhand whether the box 5 number includes supplemental insurance like dental, vision, etc. but I *think* it does.

Hopefully that gets you moving along.  No idea why the taxable amount would not be determined though, they're supposed to do that automatically now.