conundrum re. systematic error in 1099-R reporting

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JGE 17 years ago

I am in a bit of a conundrum.

I have noticed that one of my 1099-R reporters (a very large and well-known insurance/annuity company indeed, thank you) consistently makes an error in their reporting of state tax information; by faithfully entering the numbers from this 1099-R into TurboTax, I end up underpaying my state tax by a whopping $20 or so - assuming that I'm correct that there's a problem, and I'm fairly sure I am. I've checked, and they do this for each year I've checked.

It's not a lot of money, but I suspect there are many thousands of people in my state that are in the same situation.

What should I do ? Talk to the 1099-R issuer (they seem pretty boneheaded when I talk to them on the phone about much of anything) ? Talk to the state Dept. of Revenue ? Forget it ? Will I get audited every year for the rest of my life, beaten by thugs, whatever ???

Thanks !

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Harlan Lunsford 17 years ago

I don't understand your problem. Did the company report the actual amount they did withhold for state tax? Were you shortchanged?

ChEAr$, Harlan Lunsford, EA n LA

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JGE 17 years ago

Some of the 1099-R income is tax-free (some after-tax contributrions way back when), so box 2a is a bit less than box 1. They copied the box

1 figure to box 12 (state distribution). It turns out that this particular income is ALL tax-free in my state. So TurboTax deducts the box 12 number from my federal taxable income when computing the state taxable income. Thus it's deducting money from my federal taxable income that never was part of my federal taxable income in the first place, and thus my state taxable income is computed too low by the amount by which box 1 exceeds box 2a. I notice that some other 1099-R forms have box 12 equal to box 2a, which is the way I believe this one OUGHT to be.

So I can correct box 12 by hand, or I can just leave things be, in which case I'm paying about $20 too little state tax. No biggee. But for the thousands of people in my state in this situation, it could add up to quite a bit of money. So I'm tempted to be a good citizen and let the state DOR know what's up. But I'm wondering if I'll be sorry ...

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Mark Bole 17 years ago

The IRS couldn't care less about what is in boxes 10-15 of 1099-R (except indirectly, if state/local taxes paid will be an itemized deduction). If there was no state withholding, the payer's only error was in filling in information in those boxes when they should have left them blank, as many payers do.

Don't enter anything into Turbotax for the state boxes if there was no withholding.

Keeping the name of your state a secret makes it very hard to give any additional help.

Are you using the correct "State Use Code" in Box 11 for certain states, as directed by Turbotax help?

-Mark Bole

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JGE 17 years ago

TurboTax is using the box 12 number to decide how much to deduct from my fed taxable income when computing state taxable income. Maybe it shouldn't be doing it this way, but it is (if I enter the box 2a figure into box 12, then it deducts that number instead).

There was. But I tried the experiment of deleting the number in box

12, and when I revisited the form, TurboTax had copied the box 2a number into box 12, which thus makes it compute the state taxable income properly.

Fine. It's North Carolina, and the 1099-R is from TIAA-CREF, vendor for the state employees' "optional retirement program". A court case called the Bailey settlement says this money is state-tax free.

Box 11 is the payer's state ID number on mine.

Bottom line is that I know the right thing to do, which increases my state taxable income by about $200 over what TurboTax wants to compute in "conspiracy" with the incorrect 1099-R. But I imagine many NC taxpayers may not figure out what I did.

P.S. The reason I'm pretty convinced the 1099-R is not filled in correctly is that I have another 1099-R, not from TIAA-CREF but also with some federally tax-free income (so box 2a is less than box 1), which has the box 2a number in box 12. Oh, and there is no state witholding on that other 1099- R.

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conundrum re. systematic error in 1099-R reporting

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