Disability Pensions

Disability Pensions

• • Disability pensions, which are identified with a 3 in box 7 of the 1099-R, which have taxpayer after-tax contributions, are not adjusted with the simplified method until the annuitant attains the minimum age for retirement without a disability.
  • The minimum age for retirement is generally based on age and length of service.
  • If the employer is one of the following, the minimum age is given. Otherwise, you must rely on the taxpayer’s information.

    Years of Service	Retirement Age
    Civil Service Retirement System (CSRS)
    5	62
    20	60
    30	55
    Federal Employees Retirement System (FERS)
    5	62
    10	55
    Railroad Retirement Board (RRB)
    5	62
    30	60

• If the minimum retirement age has not been attained, then the distribution is 100% taxable, but on the input screen is a checkbox to check “to report on Form 1040, Line 1h”. This would treat the distribution as earned income which may have tax advantages, like qualifying the taxpayer for credits.

TXLNX 8/13/2023