Form 1099-R - Disability

For a disability code of 3, the distribution is not subject to the additional 10% tax, but the disability distribution is still included in taxable income.

Per IRS Publication 575 Pension and Annuity Income, page 5:

Disability Pensions

If you retired on disability, you must generally include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on Form 1040 or 1040-SR, line 1; or Form 1040-NR, line 8, until you reach minimum retirement age. Minimum retirement age is generally the age at which you can first receive a pension or annuity if you aren't disabled.

Caution! You may be entitled to a tax credit if you were permanently and totally disabled when you retired. For information on this credit, see Pub. 524.

Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. When you receive pension or annuity payments, you are able to recover your cost or investment. Your cost is generally your net investment in the plan as of your annuity starting date. It doesn't include pre-tax contributions.. For more information, see Cost (Investment in the Contract) and Taxation of Periodic Payments, later.

Report the payments on Form 1040 or 1040-SR, lines 4c and 4d; or on Form 1040-NR, lines 17a and 17b.

To enter this distribution into the TaxAct program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal
  2. Click Retirement Plan Income  in the Federal Quick Q&A Topics menu to expand the section and then click IRA, 401(k) and pension plan distributions  (Form 1099-R)
  3. Click +Add Form 1099-R to create a new copy of the form or click Review to review a form already created 
  4. Click Quick Entry or Step-by-Step Guidance to enter or review the information
    1. If you select Quick Entry to enter the information directly on the supporting form, be sure to select 3 - Disability in Box 7. Scroll down and review Distribution from Disability Pension Treated as Wages
    2. If you select Step-by-Step Guidance, as you enter or review the information for the disability distribution, the program will proceed to the screen titled Retirement Income - Disability, where you would indicate if you have not reached the minimum retirement age set by your employer