For the State of Mississippi
Taxable amounts include:
• Pension and annuity distributions that are taxable as early or excess distributions under the federal rules (see federal Form 5329). Code 2 indicates an early withdrawal.
• Separation pay.
• Deferred compensation plan distributions received prior to attainment of retirement age and/or service requirements.
Amounts exempt from Mississippi taxation include:
• Social Security benefits.
• Annuity benefits received under the federal Railroad Retirement Act.
• Retirement income from federal, state, and private retirement systems.
You will either need to get a corrected 1099-R (without a code 1 or 2 - do not change the code in Box 7 without getting a corrected form) OR
Enter the form you have with code 2 - and ignore the refund meter. After entering the form in the federal portion of TurboTax, you will be able to exclude the retirement income when you go through the Mississippi state return.
The ''exception'' for Box 2 is referring to the additional federal tax (penalty) for early withdrawals and does not refer to ordinary federal or state income tax. When you go through the state return, qualified retirement income can be excluded from your taxable state income. There is a section (Differences or Changes to Federal Income) where you can exclude taxable federal income from your taxable state income.
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