Earnings within a Keogh (before withdrawal) are not taxed. The withdrawal itself may or not be taxable in MA. Use Schedule X, Line 2 worksheet to determine the taxable amount, if any. Basically, the amount you contributed is not taxed, but once all the contributions have been withdrawn, the earnings are considered taxable by MA.
there is an error in TurboTax: Keogh earnings cannot be untaxed in Mass as stated by Fed TT, and then taxed in the Mass State TT forms
Zbucklyo: thank you for your answer. It is the same as my understanding of the situation. My problem is actually with TT which has a serious flaw in its Fed forms. This was supposed to be corrected over a year ago. The error persists making me believe each year that I have missed something in understanding what I need to do.
Earnings within a Keogh (before withdrawal) are not taxed. The withdrawal itself may or not be taxable in MA. Use Schedule X, Line 2 worksheet to determine the taxable amount, if any. Basically, the amount you contributed is not taxed, but once all the contributions have been withdrawn, the earnings are considered taxable by MA.