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 6:

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 1a, 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.

TIP: 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, 1040-SR, or 1040-NR, lines 5a and 5b.

To enter this distribution into the TaxAct program (if you need help accessing Form 1099-R in the TaxAct program, go to our Form 1099-R - Distribution Codes FAQ):

  1. From within your Form 1099-R, on the screen titled Retirement Plan Income - Box 7, select "3-Disability" from the 7. Distribution code drop-down.
  2. On the screen titled Retirement Plan Income - Disability, check Have not reached minimum retirement age if you had not reached the minimum retirement age set by your employer.

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