@SamS1
Thank you for that link. That was a very informative document and was useful for putting 2020 distributions in the proper context. I definitely agree with you that the spirit of the Iowa law for disasters in 2018 and 2019 was to treat federally tax-favored withdrawals from retirement plans as reportable in full for state tax purposes as it related to the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (the law from which the link you sent me was a reference to), which was signed into law on 12/20/19.
However, wouldn’t the adoption of rolling conformity with the IRC for tax year 2020, by definition, change the way such items were treated going forward unless they were specifically identified as needing to be treated differently?
Throughout the past year, the IDR has published numerous memoranda regarding Iowa non-conformity with the CARES Act signed into law on 3/27/20. None of this non-conformity guidance references federally tax-favored withdrawals from retirement plans or Section 2202 of the CARES Act.
Further, the link you sent indicates that, for 2019 distributions the non-conformity add-back for Iowa would be handled on form IA 101 “Nonconformity Adjustments” line 12. In reviewing the current IA 101 instructions (Rev. July 2020), there is no such provision for an add-back adjustment to 2020 distributions under the CARES Act. This seems to suggest that the distribution amount for Fed is to be treated as the same amount for Iowa.
A natural question that arises from this would be how is the Turbo Tax program handling the difference between the Federal distribution spread over three years versus the Iowa distribution which is being forced as a lump sum, regardless of the users indicated treatment preference? If Turbo Tax is automatically adding this back through line 12 of form IA 101, this appears to be in conflict with the literature and appears to be an error in the program itself.
Any thoughts on this? And thank you very much for your time and expertise.
