1099 State Exempt but Refund went down
I received a 1099-R after my mother passed and we got her death benefits. In BOX 14 it says EXEMPT which I take to mean this is not taxable income for NY. The system wouldn't let me add the word EXEMPT but noted to add a 0 in that field instead.
However upon adding the 1099-R I noticed that my state refund had dropped by almost 90 dollars, indicating that the state file was taking that income into consideration. Should that be happening? If it's exempt in NY, the refund amount shouldn't have changed, correct? I'm not sure if the system is adding the values wrong or not….
Answers
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I am experiencing this same issue for NY
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Did you look at the final NY tax return to see if that income was included?
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Yes. I only have one w-2 and I checked both the fed and state AGI again that value. Both show a number that's my W-2+the benefit amount. Fed is taxable but NY is not so I don't know how to make the NY AGI not reflect it
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Box 14 of your Form 1099-R showing "EXEMPT" just means that the payor was exempt from withholding state tax from the distribution. It doesn't necessarily mean that the income is exempt from being included with your taxable state income. However, if your 1099-R Box 7 contains code "4", the distribution likely is exempt from NY income tax.
If your 1099-R has already been entered into the "Income" portion of the software, you can follow the menu path below to indicate that you received Decedent Distributions.
State > Pensions and Annuity Subtractions
After you answer Yes to the question, you will be asked several more questions over the course of a few pages in the software to include the subtraction of the 1099-R distribution from your state income.
