Common questions about Form 1099-R in Lacerte

What's new for Form 5329 for tax year 2023:

• Certain corrective distributions not subject to 10% early distribution tax. Beginning on December 29, 2022, the 10% additional tax on early distributions will not apply to a corrective IRA distribution, which consists of an excessive contribution (a contribution greater than the IRA contribution limit) and any earnings allocable to the excessive contribution, as long as the corrective distribution is made on or before the due date (including extensions) of the income tax return
• Qualified disaster distributions. The additional tax on early distributions doesn't apply to qualified disaster distributions nor does it apply to qualified disaster recovery distributions. See Publication 590-B for more details.
• Maximum age for traditional IRA contributions. The age restrictions for contributions to a traditional IRA has been eliminated.

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Select a question about Form 1099-R in Lacerte:

Table of contents:

How do I enter Form 1099-R in Lacerte?

Lacerte provides an input screen to enter the information from the Form 1099-R.

1. Go to Screen 13.1, Pensions, IRAs (1099-R).
2. Select an existing 1099-R or select the Add button to enter a new Form 1099-R.
3. Complete the Payer Information section.
4. Under the Sections panel, select Form 1099-R.
5. Enter boxes 1–11 as they appear on the Form 1099-R received.
6. Under the Sections panel, select State and Local.
7. Enter any information and amounts as they appear on the Form 1099-R, including:
   • State and local tax withheld
   • Electronic Filing information
   • State taxable amounts if different from federal.
8. Depending on the situation, you may need to complete additional sections.

How do I spread the tax over three years for coronavirus-related retirement distributions in 2020?

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Why is the taxable amount on the 1040 different than the 1099-R?

The taxable amount often isn't the same amount on the 1099-R, Box 2a. It depends on the type of pension and the circumstances. Below are some general guidelines:

• Enter the taxable amount of the distribution as shown on Form 1099-R.
• For pensions, if the gross amount received from all pensions isn't the same as the taxable amount received from all pensions, both the gross and taxable amount will print on Form 1040. If the gross pension and taxable pension amounts are the same, then only the taxable amount will print on Form 1040.
• For IRAs, if the gross amount received from all sources isn't the same as the taxable amount, both the gross and taxable amount will print on Form 1040.  If the gross IRA and taxable IRA amounts are the same, then only the taxable amount will print on Form 1040 unless a conversion from a traditional IRA to a Roth IRA was made.
• The program will use the basis amount entered in Screen 24, along with the entry in Value of all traditional/SEP/SIMPLE IRAs at 12/31/2020 to calculate the taxable amount on Form 8606 if:
  • The taxpayer or spouse has basis in traditional IRAs on Screen 24,
  • The IRA/SEP/SIMPLE box is selected, and
  • The distribution isn't a return of excess contributions, a re-characterization, total rollover, or a 1035 exchange.
  • Even though Form 8606 is used to calculate the taxable amount, you must still enter the taxable amount as shown on Form 1099-R on Screen 13.1
• If the distribution is a non-qualified Roth IRA distribution with distribution code J or T and this field is left blank, the program uses the gross amount you entered to determine the taxable amount on Form 8606, Page 2. In deciding the taxable amount, the program offsets the gross distribution by any Roth contribution or conversion basis entered in Screen 24.
• If the distribution is a qualified Roth IRA distribution with distribution code Q, the distribution isn't taxed. But, if you enter a taxable amount on a qualified Roth IRA distribution, the program will carry it to Form 8606.
• If this distribution is an indirect rollover, enter the taxable amount as shown on Form 1099-R in box 2a, and enter the amount rolled over in Rollover amount, if indirect rollover on Screen 13.1.
• If the distribution is a qualified charitable IRA distribution, enter the taxable amount as shown on Form 1099-R here, and enter the amount that was transferred to the charity in IRA Distribution Transferred to Qualified Charity on screen 13.1.
• If the distribution is a one-time-only rollover to a health savings account, enter the taxable amount as shown on Form 1099-R in this field, and enter the amount transferred to the HSA in Qualified HSA Funding Distribution (traditional and Roth IRAs only) on screen 13.1.
• If the distribution was a trustee-to-trustee transfer of funds to pay for a retired public safety officer's health insurance, enter the taxable amount as shown on Form 1099-R in this field, and enter the amount transferred to the insurance company in Health Insurance Premiums of Retired Public Safety Officer on screen 13.1.

If the taxable amount of an annuity is not on the 1099-R then you can use the General rule or Simplified Method to determine the taxable amount:

Follow these steps to generate the General Rule calculation:

1. Go to Screen 13.1, Pensions, IRA Distributions.
2. Complete the Payer Information section.
3. From the left Sections, choose Form 1099-R.
4. Enter boxes 1-11 as they appear on the Form 1099-R received.
5. From the left Sections, choose General Rule.
6. Enter the following information:
   •  Annuity starting date.
   • Investment in contract (plus death benefit exclusion).
   • Expected return.
   • Investment previously recovered tax free.
   • Initial monthly annuity, if different.
   • Annuity ending date (final year only) if applicable.

Follow these steps to generate the Simplified Method calculation:

1. Go to Screen 13.1, Pensions, IRA Distributions.
2. Complete the Payer Information section.
3. From the left Sections, choose Form 1099-R.
4. Enter boxes 1-11 as they appear on the Form 1099-R received.
5. From the left Sections, choose Simplified Method.
6. Enter the following information:
   • Cost in plan at annuity starting date (plus death benefit exclusion).
   • Annuity starting date.
   • Age at annuity starting date.
   • Combined ages at annuity starting date.
   • Amount recovered tax free after 1986.

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How do I enter a distribution code T?

When code T is used, it's often nontaxable. This section will help you enter the distribution so it shows as nontaxable on the Form 1040.

1. Go to Screen 13.1, Pensions, IRAs (1099-R).
2. Complete the Payer Information section.
3. Under the Sections panel, choose Form 1099-R.
4. Enter boxes 1–11 as they appear on the Form 1099-R received.
5. In the Distribution Code #1 field, select code T from the dropdown menu.
6. Select the checkbox for IRA/SEP/SIMPLE.
7. Go to Other Information.
8. Enter a 1 in Roth IRA: 1=Qualified, 2=non-qualified, 3=Direct Rollover. (The program assumes that the Roth IRA is non-qualified by default).
   • Entering -1 in the Taxable amount field will also show the amount as not Taxable.

The -1 will keep the gross distribution amount from appearing on Form 1040, Line 4b as taxable.

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How do I enter a distribution code L?

Lacerte doesn't automatically assume the distribution is an early distribution for code L, even if the taxpayer's date of birth shows that they are under the age of 59.5.

If the Form 1099-R doesn't have any other distribution codes, and the Form 5329 is needed for the early distribution:

1. Go to Screen 13.1, Pensions, IRAs (1099-R).
2. Complete the Payer Information section.
3. Under the Sections panel, choose Form 1099-R.
4. Enter boxes 1–11 as they appear on the Form 1099-R received.
5. Under the Sections panel, choose Form 5329 (Part 1).
6. Enter the desired penalty percentage in the field Early Distribution tax: 1=10%, 2=25% (SIMPLE), 3=Suppress [Override] to generate Form 5329 and the applicable penalty.

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What happens when I have a distribution code 8?

When you have a taxable distribution from a non-IRA account that has code 8, it's listed on Form 040, Line 1 instead of Line 4 per the Form 1040 instructions.

If code 8 is used on Form 1099-R for an IRA, this will show on the Form 1040 as a normal distribution.

See IRS Publication 590-B and Form 1099-R Instructions for more information.

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How do I enter a Roth IRA Rollover and Distribution when separate Form 1099-Rs are received?

In some cases, the taxpayer and/or spouse may be issued two 1099-R's for the same transaction. One reporting a rollover from a qualified Roth IRA to another Roth IRA as a code G, and the other reporting a distribution from the second Roth IRA as a code J.

This will show you how to enter both inn Lacerte to avoid duplicating the amounts on Form 1040.

First, start with entering the Form 1099-R with code G

1. Go to Screen 13.1, Pensions, IRAs (1099-R).
2. Complete the Payer Information section.
3. Under the Sections panel, choose Form 1099-R.
4. Enter boxes 1–11 as they appear on the Form 1099-R received.
5. In the Distribution Code #1 field, select code G from the dropdown menu.

Now, enter Form 1099-R with code J

1. Go to Screen 13.1, Pensions, IRAs (1099-R).
2. Select Add to create a second Form 1099-R.
3. Complete the Payer Information section.
4. Under the Sections panel, choose Form 1099-R.
5. Enter boxes 1–11 as they appear on the Form 1099-R received.
6. In the Distribution Code #1 field, select code J from the dropdown menu.
7. In the Taxable Amount field, enter a -1.

Lacerte assumes the two activities aren't related. If no -1 is entered in Taxable Amount, the Form 8606 will fill out Part III as if the distribution were from a Roth IRA with no basis and calculate a taxable amount.

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How do I enter death benefits from a 1099-R?

When a a taxpayer receives a 1099-R from the IRA of a deceased person the Form 8606 generates and reduces the taxpayer's own IRA basis. This section will help you exclude the death benefit from the 8606 calculation:

1. Go to Screen 13.1, Pensions, IRAs (1099-R).
2. Complete the Payer Information section.
3. Under the Sections panel, choose Form 1099-R.
4. Enter boxes 1–11 as they appear on the Form 1099-R received.
5. Under the Sections panel, choose Other Information.
6. If the taxpayer qualifies for a Death Benefit Exclusion, enter the amount of the exclusion they're eligible for in the Death Benefit Exclusion ($5,000 maximum) field.
7. Under the Sections panel, choose Form 8606.
8. In the Traditional/SEP/SIMPLE IRA 1 = report on Form 8606, 2 = exclude [O] field, enter 2.

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How do I show the distribution is exempt from the 10% penalty for Form 5329? To apply an exclusion in Lacerte:

1. Go to Screen 13.1, Pensions, IRAs (1099-R).
2. Complete the Payer Information section.
3. Under the Sections panel, choose Form 1099-R.
4. Enter boxes 1–11 as they appear on the Form 1099-R received.
5. Under the Sections panel, choose Form 5329 (Part I).
6. In the Amount excluded from 10%/25% tax field, enter the dollar amount of the exclusion.
7. In the Reason for excluded amount (Ctrl+T) field, select the right code from the dropdown menu.

If you have two exceptions for one distribution, split the distribution and taxable amount onto two Form 1099-R input sheets. Apply one exclusion to each Form 1099-R input sheet in Lacerte. Lacerte doesn't support more than two exceptions on Line 2.

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How do I tell Lacerte the IRA distributions were transferred to Qualified Charity?

When the distribution is transferred to a qualified charity, a Form 1099-R will still be issued and may contain Distribution Code F for Charitable Gift Annuity.

If the Form 1099-R didn't contain a Distribution Code F, you can still show it was donated to a Qualified Charity. The taxpayer must be over age 70.5 to have this distribution not subject to early withdrawal penalties.

To enter the 1099-R donation into Lacerte:

1. Go to Screen 13.1, Pensions, IRAs (1099-R).
2. Complete the Payer Information section.
3. Under the Sections panel, select Form 1099-R.
4. Enter boxes 1–11 as they appear on the Form 1099-R received.
5. Under the Sections panel, choose Other Information. 
6. In the IRA distributions transferred to qualified charity field, enter the amount of the distribution that was donated.

What impact does this have on the return?

• The amount transferred to a qualified charity will be removed from the Taxable amount shown on Form 1040.
• If the 1099-R had capital gains in this distribution shown in box 3 on the Form 1099-R, they'll show on Form 1040, Line 6 as well as the Schedule D, Part II, with the description of From Charitable Gift Annuity.
• With Capital Gains, the Taxable Amount equals Gross Distribution, minus the Charitable Gift Annuity, minus the Capital Gain.
• In addition to reducing IRA income by the amounts that were transferred to qualified charities, sometimes a residual amount may automatically carry to federal Schedule A as an itemized deduction unless suppressed in the program by selecting the Supress itemized deductions of amounts that do not reduce AGI checkbox.
  • For example, if the taxpayer has $20,000 in basis in traditional IRAs on screen 24, and an IRA worth $30,000 in which the taxpayer had the entire amount transferred to a qualified charity, the program will reduce income by $10,000 (the otherwise taxable amount), and deduct the residual $20,000 amount on Schedule A.

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How do I print PSO on Form 1040 Line 5b

1. Go to Screen 13.1, Pensions, IRA distributions.
2. Enter all applicable information for the 1099 or select the pension on the left if it has already been entered.
3. Scroll down to the Other Information section.
4. Enter the amount in, Health Insurance Premiums of Retired Public Safety Officer ($3,000Max)
5. The amount entered is subtracted from the taxable amount of this pension. PSO will print to the left of the pension line on the 1040

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