I have received a Notice of Assessment from the state of Kansas for 2019 regarding my retirement distribution. I was a State employee and I currently receive KPERS retirement. The issue is regarding the funds I took from my KPERS and invested them into a different qualified annuity. I receive monthly distributions from both the annuity and KPERS. I took half of my KPERS before or when I retired in 2008 to invest in this annuity and have received monthly distributions since that time.
When I did this I made certain I did a direct rollover into a qualified account as I was instructed to do. I have not and should not have to pay State income tax since I used my exempt Kansas retirement funds for this.
My 1099 R for this annuity has the same amount in box 1 and box 2a. Box 2b has taxable amount not determined checked. There is a distribution code of 7 with IRA/SEP/Simple checked. There are no amounts in state distribution. (box 14) The state payers box (13) has their tax id number and there was state taxes taken out (box 12).
I did not do anything different in 2019 than I did in years before and have inputted my 1099r in the same way since. So far only 2019 is being questioned. My question is what is the best way to fix this or clarify this to the state? I do not understand why this issue would come up this many years later. Is this something the annuity could clarify with a different or additional distribution code on my 1099r? Would a letter of explanation be sufficient? Any advice about how to deal with this would be greatly appreciated.
