State tax filing

The Retirement Plan Income previously taxed by another state works by allowing a subtraction for the retirement income created in another state.  

For example, if you moved to Virginia but your retirement account was set up in North Carolina.  The funds contributed while in North Carolina could be deducted from the Income for Virginia.  

To utilize this deduction, you would follow these steps in TurboTax Desktop:

1. Start with Federal, Click Wage & Income
2. Click Start next to Retirement IRA, 401(k), Pension Plan Withdrawals
3. Enter 1099 as it appears on your form
4. Once Federal Return is complete, move to the state
5. Click Edit next to Virginia
6. Under Retirement, Click Revisit next to Retirement Income Adjustment
7. Answer the question, "Have you ever lived outside Virginia? (to claim the credit, you must have lived outside Virginia)
8. Answer, "Did you contribute to a retirement plan when you did not live in Virginia?" (to claim the credit, you must have contributed to a retirement when you did not live in Virginia.)
9. Answer, "Did your state tax your contributions?" (to claim, your state must have taxed the contributions)
10. Enter the amount of the retirement plan income previously taxed by another state.

If you live in Virginia, you would not need to create a non-resident return to claim the deduction.  You have to enter the information about living in another state and that state taxed the contributions made in that state.  

The documentation used to support this claim would be the 1099-R and documentation showing how much was taxed by the previous state if it is not listed on your 1099-R under state.  Maintaining an accurate record of the information claimed on the return is essential.