Accidental Disability Taxation

[jcomunale]

Client husband is a NJ police officer permanently disabled on the job. He gets a tax free pension until he is 65. He passes away and his spouse gets his benefits. The 1099-R shows tax free. The IRS allowed it under exam in previous periods. Question is .. does the tax free nature of this distribution cease when the surviving spouse turns 65 or when the original pensioneer would have turned 65. In this case the pensioneer was younger. 

[PATAX]

What does the entity that issues the 1099R say about this? Yes, I know 1099R issuers make mistakes.

[IRonMaN]

I don't know the answer but the pensions turn taxable when the person receiving the benefits turns 65 so if I was going to make a bet, I would put my money on when the surviving spouse turns 65.  But for what it's worth, I'm not much of a gambler and I have never had much luck at winning when I buy a raffle ticket so take it for what it's worth.  @PATAX can now join me in a chorus of :

Gloom, despair, and agony on me
Deep, dark depression, excessive misery
If it weren’t for bad luck, I’d have no luck at all
Gloom, despair, and agony on me

[PATAX]

Everyone do a Google search on Gloom Despair and Agony On Me. You will see what Iron Man is talking about. It's different Hee Haw clips. And they are great. God why can't they bring the old great shows back instead of this garbage that they have on TV now. Time to go to sleep now as it's past my bedtime.😴

[jcomunale]

1099R say non taxable and so does NJ guidance but no guidance as to when it stops being tax free. Client will turn 65 this year so being proactive.