Solutions, there are, for avoiding payment to Massachusetts on normal Roth Disbursements, which are NEVER taxable in the State of Massachusetts.
A) After completing your Fed Return and e filing or mailing just the Federal Return, change code to Q before completing your State of Massachusetts return. (You will have to mail your State of Massachusetts return, I believe, since Turbo Tax won't let you e file for Massachusetts if you use this methodology for changing to Q after you have completed and e filed the Federal Return. In this manner Turbo Tax will generate a State of Massachusetts return correctly showing no tax liability for normal withdrawals (disbursements) from a Roth.
B) If you answer the questions perfectly, and it is a trial an error for some, you won't show liability to the Commonwealth of MA. A Turbotax "team" took me through it last year, and "Bingo", there was no tax liability for the Roth for Massachusetts. But it was a terrible exercise. One Turbo Tax guy was talking me through it on the phone, and another Turbo Tax guy in the background was instructing the two of us how to answer various questions. I doubt I could do it today unless I spent an hours time. Fortunately it can be done if you keep going through the Turbo tax questions answering them in different ways. The A method is easier for me.
One of the problems is the Schedule X for Massachusetts. Their use of the word disbursement is "faulty". People reading the page 19-20 rules and filling out the two charts are "absolutely" bound to be confused unless they keep in the back of their minds that "There is no Massachusetts Tax Liability Whatsoever" for taking a "normal" disbursement from your Roth. The problem on pages 19-20 of the schedule X instructions is that they are talking about a disbursement from a Regular IRA to Rollover to a Roth. This was shown to me by a CPA Tax Consultant and once IRS employee. One can only assume that thousands of folks in the Commonwealth of Massachusetts are unsuspectingly paying taxes on Normal Roth Disbursements.
