While whether 1 or 2a is used "might" be dependent on what state is involved as to which value needs to be used for the state distribution amount...I suspect it is 2a for most of them.....but one would need the software developers to closely examine each and every state software set to see how they actually use that number
In my own state (NC) it is 2a. When entering my 401k 1099-R, as issued , it has after tax contributions (box 5), that reduce box 1 to produce a lower 2a...... When that 1099-R is entered as-is, the tax software automatically uses the box 2a value as the State Distribution Amount when I get to the page that asks for the value...then the software backfills box 16 (box 14 in prior years) with that 2a value....with no intervention on my part. (yeah, if 2a is blank, then that has to be determined)
In some cases for NC (and probably other states software too) , certain Federal or NC State pensions can be fully deducted from NC income, the so-called Bailey Settlement. BUT only to the extent that the income was included in Federal AGI in the first place.
.....in earlier software years (say 2013), for this so-called NC "Bailey" eligible Pension with, say box 1=20,000 and box 2a validly at 15,000 due to 5,000 of after-tax contributions...the software would put box 2a value of 15,000 automatically as the state distribution amount on the follow-up page. IF one replaces that with the box 1 value of 20,000, then the software proceeds to improperly subtract the full 20,000 from the starting Federal AGI ....when only 15,000 was in the federal AGI in the first place. Thus producing an NC income 5,000 lower than it should be.
I've noted that the software developers have appeared to reprogram the software now to properly limit this in the past several year's NC software to the acceptable 15,000 reduction in state income, even if one re-enters the full 20,000 to replace the 15,000 it expected to use......but the implication remains that the value of 2a is the software-intended value for the state distribution amount....at least for NC.
Other states ??? Can't speak for how afar along they are in delineating that difference.
A state that allows a full deduction of any retirement income from Federal AGI when boxes 1 and 2a are different, and only box 2a is included in Federal AGI??? Are those states properly programmed to use the 2a value automatically, or blindly use whatever is in the "State Distribution Amount".
IF a state allows a 20,000 reduction in retirement income, and they only have one 1099-R with box 1 at 20,000 and 2a is validly 10,000 (I've been close at one time), will putting 20,000 in the State Distribution Amount subtract a full 20k form Federal AGI when 2a=10k subtraction is proper ?
Yeah, I can't speak to how all the other states are being programmed, and if the are being consistently used in a similar way for boxes 1 and 2a.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
