Pension With Distribution Code '3'

[Dave T]

T/P is 56, unmarried, no children, receives 1099-R with distribution code '3' which is for disability. Amount received approx. $ 10,000.

In addittion he receives approx. $ 16,000 in SS.

What I find interesting is this - the pension, because it is disability, flows to line 7 - Wages, and thus he qualifies for $ 280.00 in EIC.

Just looks unusual but thats the way it flows when doing the EIC.

- Dave T

[Terry D EA]

I think you need to double check that entry. The amounts from the 1099R should go to retirement income, can't remember which line on the the 1040 but I have never seen this. In my opinion this cannot be considered wages.

[jainen]

>>this cannot be considered wages<<

According to Pub 596, Earned Income Credit (EIC), "taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age."

[Terry D EA]

Thanks Jainen for pointing this out.

[Joel]

A few years ago I had a client who was on disability, his wife was blind and they had an adult son who also was disabled. Until he reached his normal retirement age I was so happy to inform them that they would receive EIC.

[SCL]

i confirm jainen and joel.

also, with the fm1099 code 3, i believe you need to check something about ?before company retirement age.

[kcjenkins]

No need to 'check' anything, the program gets the age info from the taxpayer info page. It's not the 'company' retirement age, it's the SS retirement age.

[SCL]

the 'check' off is there and needed to get the disability pension amount to ln 7...from fm1099r, box 7, code 3, + under the min retirement age.

now, i do agree that "under the min retirement age " is about the min soc sec age, although i think the min soc sec age is also the min company retirement age.

[jainen]

>>"under the min retirement age " is about the min soc sec age<<

It refers to the company retirement age, which could be 55 or lower. Pub 596 says, "Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled." But if you paid the premiums yourself, a disability pension is not earned income.