Is this retirement distribution from Fidelity Investments an excludable distribution for Massachusetts?

[lserhal]

Hi, 

I had a company 401K distribution last year. I am presented with the question "Is this retirement distribution from Fidelity Investments an excludable distribution for Massachusetts?". I already had both extra federal and state taxes withheld by Fidelity. Which one of the following two options do I select:

• Yes, this distribution is excludable (This does not include rollovers), or
• No, this distribution should not be excluded, or the distribution is a rollover to another retirement account. 

If I choose Yes, then I can choose T - Taxable Pension from the Type drop-down list in the Verify or Adjust the type of Pensions and Annuities section.

I think I should select No. The next step, I am prompted on the Pension Adjustment - Federally Taxable page to enter Non-Taxable Massachusetts Pensions which is 0 by default. I left it as 0 and then clicked Continue and that seemed to work; i.e. I am not asked any further questions.  

Did I get this right? 

Thanks for your help!

Lauran 

[BillM223]

For the rules in Massachusetts for taxing 401(k)s, please scroll down to "401(k) qualified Cash or Deferred Arrangement (CODA) plan".

Generally, if the contributions to your 401(k) were excluded from MA tax (as would be normal), then the distribution would be taxable in MA. When would the contributions not be excluded from MA tax? When you made after tax contributions to the 401(k) plan - many people don't do this however.

Since you did not have a pension from a government plan, and if this is not a rollover, then, it sounds like you should answer NO...in any case, unless you have "basis" in your pension (after tax contributions) then your pension should be taxable in MA, however, you need to make this work out.