If the taxpayer is an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), they can elect to exclude from income distributions made from an eligible retirement plan that are used to pay the premiums for coverage by an accident or health plan or a long-term care insurance contract. Note the following:
- The election can only be made if the taxpayer retired because of disability or because they reached normal retirement age.
- The premiums can be for coverage for the taxpayer, their spouse, or dependents.
- The distribution must be from a plan maintained by the employer from which the taxpayer retired as a public safety officer.
- The distribution must be made directly from the plan to the provider of the accident or health plan or long-term care insurance contract.
- The maximum amount that can be excluded from income is $3,000.
- The election can only be made for amounts that would otherwise be included in income.
In Keystone Tax Solutions Pro Online, to exclude the amount for a Public Safety Officer, from the Federal Section select:
- Income
- IRA/Pension Distributions
- Add or Edit a 1099-R, select Begin
- Fill out the Payer’s Information
- Enter the Gross Distribution in Box 1 as shown on the 1099-R
- Below “Box 2a Taxable Amount” is a question: “Do you need to calculate your taxable amount?”. Select Click here for options.
- Public Safety Officers Distribution, select Begin
- Enter an amount in the Public Safety Officers Exclusion for Health Insurance Premiums field (up to a maximum exclusion of $3000).
- Click Continue.
The Taxable Amount in Box 2a will be adjusted by the exclusion amount. Continue filling out the rest of the 1099-R.
NOTE: This is a guide to entering Public Safety Officer Distributions into the Keystone Tax Solutions ProWeb program. This is not intended as tax advice.
Additional information:
Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits