Common questions about form 1099-R in ProConnect Tax

ProConnect Tax provides an input screen to enter the information from the 1099-R.

1. From the Input Return tab, click Income on the left-side menu.
2. From the Income submenu, select Pensions, IRAs (1099-R).
3. Click the Details button at the end of the desired row.
4. Complete the Payer Information section.
5. Enter boxes 1-11 as they appear on the Form 1099-R received.
6. Scroll down to 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, and state taxable amounts if different from Federal.
8. Depending on the situation, additional sections may need to be completed.

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The taxable amount often is not the same amount on the 1099-R box 2a. It depends upon 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 is not 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 is not 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 to Roth IRA was made.
• If the taxpayer or spouse has basis in traditional IRAs on Screen 24 and the IRA/SEP/SIMPLE box is checked, and the distribution is not a return of excess contributions, a re-characterization, total rollover, or a 1035 exchange, the program will use the basis amount entered in Adjustments to Income, along with the entry in Value of all traditional/SEP/SIMPLE IRAs at 12/31/2020 to calculate the taxable amount on Form 8606.  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 Pensions, IRAs (1099-R).
• 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 entered to determine the taxable amount on Form 8606, page 2.  In determining the taxable amount, the program offsets the gross distribution by any Roth contribution or conversion basis entered in Adjustments to Income.
• If the distribution is a qualified Roth IRA distribution with distribution code Q, the distribution is not taxed. However, 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 Pensions, IRAs (1099-R).
• 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 Pensions, IRAs (1099-R).
• 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 Pensions, IRAs (1099-R).
• If the distribution was a trustee-to-trustee transfer of funds to pay for a retired public safety officers 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 Pensions, IRAs (1099-R).

When code T is used this is often non-taxable. This section will help you enter the distribution so it shows as non-taxable on the 1040.

1. From the Input Return tab, click Income on the left-side menu.
2. From the Income submenu, select Pensions, IRAs (1099-R).
3. Click the Details button at the end of the desired row.
4. Complete the Payer Information section.
5. Enter boxes 1-11 as they appear on the Form 1099-R received.
6. Select code T in the Distribution Code #1 drop-down menu.
7. Mark the checkbox for IRA/SEP/SIMPLE.
8. In the Taxable amount field enter a -1.

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

ProConnect Tax 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 59 1/2.

If the 1099-R does not have any additional distribution codes and the 5329 is needed for the early distribution:

1. From the Input Return tab, click Income on the left-side menu.
2. From the Income submenu, select Pensions, IRAs (1099-R).
3. Click the Details button at the end of the desired row.
4. Complete the Payer Information section.
5. Enter boxes 1-11 as they appear on the Form 1099-R received.
6. Enter the desired penalty percentage in the field Early Distribution tax: 1=10%, 2=25%, 3=Suppress [Override] to generate form 5329 and the applicable penalty.

When you have a taxable distribution from an non-IRA account that has code 8 it is listed on the 1040 line 1 instead of line 4 per the 1040 instructions.

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

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

1. From the Input Return tab, click Deductions on the left-side menu.
2. From the Deductions submenu, select Adjustments to Income.
3. Scroll down to the Traditional IRA section and enter the appropriate information in the following:

   • Form 8606 (Part I)

   • Enter the taxpayer and spouse's basis in Traditional IRAs at the beginning of the current year in the Form 8606 (Part I) subsection under IRS basis for 20XX and earlier years. If nondeductible contributions are made in the current year, and distributions are also taken, the program prints this amount on line 1 of the IRS Pub 590 worksheet.

     Form 8606 (Part III)

   • Enter the taxpayer or spouse  basis in Roth IRA Conversions in the Roth IRA: Form 8606 (Part III) subsection under Basis in Roth IRA Conversions as of 12/31/20XX.  If the taxpayer receives a Roth IRA distribution in the current year, the basis amount entered prints on Form 8606, page 2, line 24. If the taxpayer did not receive a Roth IRA distribution in the current year, page 2 will not be generated. The program, however, will retain the basis and proforma it to next year, increasing it by any additional Roth IRA conversions made in the current year. The program prints a Roth IRA Basis Schedule with the Worksheets.
   • Enter the taxpayer and spouse's basis in Roth IRAs at the beginning of the current year in the Roth IRA: Form 8606 (Part III) subsection under Basis in Roth IRA Contributions as of 12/31/20YY. If the taxpayer receives a Roth IRA distribution in the current year, the basis amount entered prints on Form 8606, page 2, line 22.  If the taxpayer did not receive a Roth IRA distribution in current year, page 2 will not be generated. The program, however, will retain the basis and proforma it to next year, increasing it by any additional Roth IRA contributions made in the current year. The program prints a Roth IRA Basis Schedule with the worksheets.

Follow these steps to report a Traditional IRA distribution:

1. From the Input Return tab, click Income on the left-side menu.
2. From the Income submenu, select Pensions, IRAs (1099-R).
3. Click the Details button at the end of the desired row.
4. Complete the Payer Information section.
5. Enter boxes 1-11 as they appear on the Form 1099-R received.
6. Select a code from the Distribution code #1 drop-down menu.
7. Check the IRA/SEP/SIMPLE box.
8. Enter the Gross distribution amount.
9. Enter the Taxable amount.
10. Enter any Federal income tax withholding or State income tax withholding amounts that apply.
11. Click the Details button.
12. Enter the Payer Information. The following entries are mandatory if any federal or state tax was withheld:
    • Federal identification number
    • Name of payer
    • Street address
    • City
    • State and Zip Code (if U.S. address)
    • Region, ZIP code, and Country (if foreign address)
13. If any state tax was withheld, scroll down to the Electronic Filing section.
14. Enter the two-letter state abbreviation, in all caps, in (13) ST.
15. Enter the (13) State identification number.

Follow these steps to report a Traditional IRA rollover:

1. Enter the distribution as you normally would, using the steps above.
   • Do not reduce the amount entered in Taxable amount by the rollover amount.
2. Scroll down to the Rollovers section.
3. Enter the rollover amount in To other than a Roth IRA.

ProConnect Tax will subtract the rollover amount from the taxable amount, and carry the difference to Form 1040, line 4b (line 15b in prior years).

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 reported a distribution from the second Roth IRA as a code J.

This will show you how to enter that in ProConnect Tax to avoid duplicating the amounts on the 1040.

We first start with entering the 1099-R with code G.

1. From the Input Return tab, click Income on the left-side menu.
2. From the Income submenu, select Pensions, IRAs (1099-R).
3. Click the Details button at the end of the desired row.
4. Complete the Payer Information section.
5. Enter boxes 1-11 as they appear on the Form 1099-R received.
6. Select code G in the Distribution Code #1 drop-down menu.

Now we enter the 1099-R with code J.

1. From the Input Return tab, click Income on the left-side menu.
2. From the Income submenu, select Pensions, IRAs (1099-R).
3. Click the Details button at the end of the desired row.
4. Complete the Payer Information section.
5. Enter boxes 1-11 as they appear on the Form 1099-R received.
6. Select code J in the Distribution Code #1 drop-down menu.
7. In the Taxable Amount field enter a -1.

ProConnect Tax assumes the two activities are not related, and 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 thus calculate a taxable amount.

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. From the Input Return tab, click Income on the left-side menu.
2. From the Income submenu, select Pensions, IRAs (1099-R).
3. Click the Details button at the end of the desired row.
4. Complete the Payer Information section.
5. Enter boxes 1-11 as they appear on the Form 1099-R received.
6. From the left Sections, choose Other Information. 
7. If the taxpayer qualifies for a Death Benefit Exclusion enter the amount of the exclusion they are eligible for in the Death Benefit Exclusion ($5,000 maximum) field.
8. At the top of the screen, select Form 8606.
9. In the Traditional/SEP/SIMPLE IRA 1 = report on Form 8606, 2 = exclude [O]  field enter a 2.

To apply an exclusion in ProConnect Tax:

1. From the Input Return tab, click Income on the left-side menu.
2. From the Income submenu, select Pensions, IRAs (1099-R).
3. Click the Details button at the end of the desired row.
4. Complete the Payer Information section.
5. Enter boxes 1-11 as they appear on the Form 1099-R received.
6. At the top of the screen, select Form 5329
7. In the Amount excluded from 10%/25% tax field enter the dollar amount of the exclusion.
8. In the Reason for excluded amount (Ctrl+T) field choose the exclusion code and reason.

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

When the distribution is transferred to a qualified charity, a 1099-R will still be issued and may contain Distribution Code F for Charitable Gift Annuity. If the 1099-R didn't contain a Distribution Code F you can still indicate it was donated to a Qualified Charity. The taxpayer must be over age 70 1/2 to have this distribution not subject to early withdrawal penalties.

To enter the 1099-R donation into ProConnect Tax:

1. From the Input Return tab, click Income on the left-side menu.
2. From the Income submenu, select Pensions, IRAs (1099-R).
3. Click the Details button at the end of the desired row.
4. Complete the Payer Information section.
5. Enter boxes 1-11 as they appear on the Form 1099-R received.
6. At the top of the screen, select Other Information. 
7. 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 show on the 1040.
• If the 1099-R had capital gains in this distribution shown in box 3 on the 1099-R; they will 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 charity’s, in some cases a residual amount may automatically carry to federal Schedule A as an itemized deduction unless suppressed in the program by checking the Suppress itemized deductions of amounts that do not reduce AGI checkbox directly below where the amount transferred to the qualified charity is entered.
  • As an 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.

Form 1099-R instructions indicate that there is no special reporting requirement for issuing companies when the public safety officer transfers pension funds to their health plan. Therefore the gross amount and taxable amount of the distribution are reported in normal fashion on Form 1099-R, and it's up to the taxpayer to determine and claim this benefit when filing their tax return.

1. Go to the Input Return tab.
2. On the left-side menu, select Income.
3. Click on Pensions, IRAs (1099-R).
4. Locate the pension in this list.
   • Note: the provision does not apply to IRAs.
5. Click the Details button.
6. Scroll down to the Other Information section.
7. Enter the amount of the pension transferred to the health plan in Health insurance premiums of retired public safety officer ($3,000 max).