IRA/Pension & Social Security Benefits

IRA/Pension and Social Security Benefits

The next Income section pertains to retirement, most notably railroad and social security benefits. Guidance is provided for entering retirement benefits in Web1040 Pro, including income reported on the following forms: 1099-R, SSA-1099, RRB-1099-R, and RRB-1099

1099-R / RRB-1099-R

Much like the entry of a W-2, Web1040 Pro has made the entry of 1099-R information as simple as possible. To enter this income click Add or Edit a 1099-R. The following screen will resemble Form 1099-R.

NOTEAdding a Form RRB-1099-R follows a very similar process. This section can be used for either form. To enter Form RRB-1099-R, select the second option on the IRA/Pension menu. Disregard any instructions that pertain to options only on Form 1099-R.

At the top of the screen the preparer will select whether the 1099-R is a standard or substitute copy.

At the bottom of the screen, enter any state information listed on Form 1099-R.

If the program recognizes a penalty may be due, a warning will appear after clicking Continue. If the taxpayer needs to adjust the portion subject to the penalty, Form 5329 will need to be completed; it is located under Federal Section -> Other Taxes -> Tax on Early Distribution.

SSA-1099 / RRB-1099

The next menu under IRA/Pension Distributions covers Social Security Benefits as well as Tier 1 Railroad Retirement Benefits.

  • Open the third option on the retirement income menu, titled Social Security Benefits/RRB-1099.
  • The following page is very simple and only requires the taxpayer/spouse’s benefit, tax withheld, and Medicare premiums. For an RRB-1099, enter the amount from Box 5 on the taxpayer/spouse’s benefit line.
  • If a lump sum Social Security benefit was received by the taxpayer, click Begin Worksheet.
  • The following page allows the preparer to select the applicable year, previous filing status, previous AGI, and other information necessary to compute the taxable benefit.
  • Additional years can be added after the initial entry.

Nontaxable Distributions & Miscellaneous Retirement Income

Nontaxable Distributions, the final menu under IRA/Pension Distributions, is used for identifying 1099-R income that qualifies for a tax exclusion. Checking a box will add the proper notation to the return, on the bottom of page 2 of the 1040. Web1040 Pro supports the following:

  • Qualified Charitable Distribution (QCD on page 2 of 1040)
  • Qualified Health Savings Account (HSA) Funding Distribution (HFD on page 2 of 1040)
  • Exclusion for Health Insurance Premiums for a Retired Public Safety Officer (PSO on page 2 of 1040)

NOTEReduce box 2a, Form 1099-R, by the amount of excluded income. Box 2a should only contain income that does not qualify for an exclusion. For the PSO exclusion, this is addressed under the box 2a menu titled Click here for options (page 51).

Unemployment Compensation

Unemployment benefits generally include any amounts received under the unemployment compensation laws of the United States or of a state. If a taxpayer received unemployment income during the year, they should receive Form 1099-G. These payments are entered in Web1040 Pro under Income -> Unemployment Compensation -> Add or Edit a 1099-G.

The 1099-G entry menu resembles other income sections in Web1040 Pro:

Repayment of Unemployment

The other menu under Unemployment Compensation is for repayment of unemployment.

  • If unemployment benefits were paid and then later denied, or more benefits were paid out than the taxpayer or spouse was entitled to, the benefits must be repaid.
  • If the taxpayer or spouse repaid current year unemployment compensation that was received in the current year, enter the amount that was repaid.

-The amount will be subtracted from the amount of unemployment compensation entered on the previous menu.

-If a repayment was made for a previous year, follow the instructions listed at the bottom of the page.

Form 1099-Misc

Web1040 Pro’s 1099-MISC menu simplifies the entry of miscellaneous income, whether it be nonemployee compensation, rental income, royalty income, and so on. The 1099-MISC menu is the sixth option on the Income main menu. Complete the menu with information reported on your client’s 1099-MISC.

  • Depending on which boxes you enter information, the program will guide you to the appropriate supporting documentation.
  • If an entry was made in box 1, 2, or 7, a guidance screen will appear after clicking Continue:
  • Clicking the link will take the preparer to the entry screen for either Schedule C or E, whichever is applicable. The income and any withholding entered on the 1099-MISC menu will carry over.
  • If you return to the 1099-MISC, you can see your prior entry, along with the form its information was carried to:
  • If the preparer chooses not to create a Schedule C/E, they may return to the 1099-MISC menu later. If the preparer fails to assign the income, an error message will appear prior to E-File. Click Visit to go directly to the incomplete 1099-MISC.
  • Keep in mind, if income is entered on a 1099-MISC and carried to a Schedule C or E, that income is not entered again. If the taxpayer did not receive a 1099-MISC but needs to file a Schedule C or E, follow the instructions in the succeeding sections.