Discussion:Health Ins. Premiums on CSA 1099R
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Discussion Forum Index --> Tax Questions --> Health Ins. Premiums on CSA 1099R
| 10 March 2007 | |
| My client receives a CSA 1099R. There is an amount in the Health Insurance Premiums box. Is this amount deductible as a medical expense, in addition to out of pocket expenses incurred, when calculating medical and dental expenses that exceed 7.5% of AGI? Thank you. | |
| 10 March 2007 | |
| Should be coming out as a tax-free distribution. Don't believe that this would be deductible. | |
| March 10, 2007 | |
| Yes, it is deductible. These are health insurance premiums paid from the taxable distribution. (By the way, ProSeries Pro has a field for these premiums on the CSA 1099R worksheet. After entering the health insurance premiums in this field, ProSeries includes the amount in the medical section of Sch A.) | |
Lmcdon9822 (talk|edits) said: | 14 March 2007 |
| When the client reaches minimum retirement age (59 1/2) this annuity is not taxable. Is that correct? Also if TP is under the minimum retirement age, does the taxable amount decrease each year? When do you use the Simplified Method to determine taxability? | |
| 14 March 2007 | |
| Sorry, I read that too fast. I gave the rule for 1099R. The rules for CSA 1099R are different. Deback gave you the correct answer. | |
Actionbsns (talk|edits) said: | 16 March 2007 |
| I have a CSA 1099-R, too. I didn't realize it was anything more than a 1099R so now I have two questions - what is the CSA part? and why is it different from a regular 1099R?
Second question deals with La Certe. Debeck, you mentioned that Pro Series Pro has a field for the health insurance, La Certe doesn't seem to have one that I can find. So last year and this year, I entered the Gross and the taxable amounts as the same and the health insurance on Schedule A. I just noticed that the prior tax preparer must have deducted the insurance premium from the taxable amount because on on Line 16(a) and 16(b) of the 2004 return there are entries that are different by what would very likely be the health insurance. I have entered my 1099 in both years exactly the same and only get an entry on Line 16(b) which is the taxable amount. I think I'm right. | |
| March 16, 2007 | |
| CSA stands for Civil Service Annuity. In the 1099-R worksheet in ProSeries, there are separate boxes to check for 1099-R, CSA 1099-R, and a couple others, including Railroad Retirement. After you check the CSA 1099-R box, you are given a different worksheet that includes a field for deductible health insurance premiums. Some of the regular 1099-R forms also show deductible health insurance premiums at the bottom left. For example, State of Michigan retirees can deduct the amount of health ins premiums deducted from their taxable pensions. (I'm disagreeing with Riley again on this point.)
For Civil Service employees who have worked for CS a long time (can't remember the year when this changed) and contributed to their retirement plan, the taxable portion of the gross annuity will be somewhere between 85% and 93%. This is something I keep track of for many of my CS retirees who retired several years ago. To answer your question, the taxable annuity on CSA 1099-R is NOT the gross annuity less the health insurance premiums. Most likely, the retiree's contributions are being recovered by reporting a lesser amount for the taxable portion of the annuity. Find the percentage of the taxable amount reported divided by the gross annuity. This is probably the taxable percentage that should be used every year for this client. If you find this to be true, you should probably amend the 2005 return and fix the 2006 return, if you haven't filed it yet. | |
Actionbsns (talk|edits) said: | 16 March 2007 |
| Deb, my CSA 1099-R doesn't indicate both a taxable and the gross annuity amount, only the gross annuity amount. The box for reporting the taxable amount says unknown. How do I get the numbers you are talking about? They are picking up their return in a couple of hours. | |
Actionbsns (talk|edits) said: | 16 March 2007 |
| Deb, I just took a percentage of the numbers provided on the 2004, and you are right, the taxable portion is 93% of the total annuity. I'm assuming I can use this. How do you know this and how do you find out, how do you even know to ask? | |
| 16 March 2007 | |
| To deduct or not to deduct udually depends on whether the employee is prohibited from paying for the benefit with pre-tax dollars. My understanding is that federal retirees are currently prohibited by federal law from using pre-tax dollars from a retirement plan to purchase health insurance benefits, forcing them to use after-tax dollars. There has been a bill pending in Congress for several years now to change this. I understand that many states also have a similar prohibition. Those who are drawing a private pension should be able, in most instances, to use pre-tax dollars to purchase their health insurance. | |
| March 16, 2007 | |
| Actionbsns - Sorry for the delay. Got busy with this new computer all night. Yes, use the 93%. That is the taxable percentage that should be used for this particular client every year for the rest of his life. I learned all of this many years ago, and it's all in Publication 721. | |
| March 16, 2007 | |
| Another note: The taxable percentage will vary for each individual, based on his or her contributions when employed with the US Civil Service. I'm sure this is all explained in Publication 721. My experience with US Civil Service retirees has been in the range of 87% to 93%. | |
Actionbsns (talk|edits) said: | 16 March 2007 |
| Deb - thank so much for this information. My client just left a happy camper. They had more income this year than last and because of it they have to pay a couple thousand dollars. This helped reduce the liability a few hundred, in addition I amended 2005, at no charge of course, and they are pretty happy about it. I really appreciate your help. Paula | |
| March 16, 2007 | |
| To answer your questions, way back in the mid-80s, when my local Postmaster retired (and I think I had a couple other Civil Service Retirees back then, maybe before the Postmaster), he brought his paperwork that showed his contributions and instructions on how to figure the taxable percentage. Somewhere, when reading his or someone's documents, I discovered the IRS publication that explained all of this, complete with worksheets, etc.
In more recent years, US Civil Service retirees' 1099-R forms will show the taxable portion, but for those who retired in the early 90s, 80s, and before have to use the worksheet. I can't remember when this changed, but it has to be about 13 years ago or more. It's been a long time since I've had to deal with this, other than multiplying the percentage (that I keep track of in clients' folders) by the gross annuity. I probably have only 1/2 dozen or less clients that I have to do this for now, since the others have passed on. So, any new tax preparers in the last 10 or 15 years may not know to even ask about this situation (unless you're like Riley and have the complete IRC memorized--that's a compliment, Riley). The best thing to do for any client who has a CSA 1099-R that is blank in the taxable box is to ask the client what his taxable percentage is--or obtain his prior year's tax return and CSA 1099-R in order to figure the percentage. | |
| March 16, 2007 | |
| Sure, Paula. I'm just sorry that I wasted so much time all night being away from this site. I just noticed you posted your question over three hours ago. How time flies when you're trying to get a network working with Vista and XP and nothing you do works! Again, I'm sorry for the delay. | |
| 23 March 2007 | |
| In the tax practice I just bought, I have come across quite a number of these CSA 1099's and a few Railroad RRB 1099's with substitute social security benefits. I tell you, it has been interesting learning these things. Proseries has a neat calculation area down below when you click on the CSA 1099 box on the top of the 1099's. And for those of you that haven't noticed <like me, early on this year> when you click on each of these, different boxes become available.
The calculation area down below for the CSA's takes into account the individuals age and year of retirement. I am not positive, but I think it uses the initial contribution amounts and possibly the life expectacny of the retiree at age of retirement. Based on the year they retired, there are also different scenarios that they must use. Pub 721 is the thing to read. I am having one of my part time preparers become the expert on this so she can show me afterwards. Anybody come across a CSF 1099? I just noticed this box as wel and haven't used it yet. | |
Bushmaster (talk|edits) said: | 23 March 2007 |
| There are several ways to calculate the taxable portion of a CSA. There was a 3 year rule (meaning you divided your contribution by 3 and took it that over 3 years), a no tax rule (no tax on retirement benefits until it used up the contribution amount), a life expectancy table. It all depended on when you retired which method you could CHOOSE. I like the ones where it states on the 1099 what the taxable amount is. | |
