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casey-mercier
Returning Member

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

 
10 Replies
SamS1
Expert Alumni

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

No.  Mississippi exempts all forms of retirement income from taxation, including Social Security benefits, income from an IRA, income from a 401(k) and any pension income as long as your 59 1/2.  You can review your Mississippi return in TurboTax.   You can review your MS return in the following steps:

  1. While in your TurboTax account, select Tax Tools in the left margin
  2. Select Tools
  3. Select View a Tax Summary
  4. In the left margin,  Select MS Summary to review you Mississippi return information.

 

casey-mercier
Returning Member

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

when i add my state 1099r to my taxes my state taxes increase almost a thousand dollars. it also shows my retirement income as part of my gross income amount being taxed by the state. 

ReneeM7122
Level 8

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

To stop your retirement income from being counted as part of gross income and being taxed by the state, you'll need to first add the income to your Federal Income tax return and then in the State income tax return.

Here are the steps to enter your exempt State employee retirement income:

 

On the  Federal Income Tax  portion:

  1. In the search or find box, type in 1099-R
  2. Click on Jump to 1099-R
  3. Scroll down to Retirement Plans and Social Security
  4. At IRA,401(k), Pension Plan Withdrawals (1099-R), click Start (or Update)
  5. Enter your 1099-R or if you have entered it, click on Edit then Continue
  6. Answer the next questions until you get to the Where Is This Distribution From? screen
  7. Select the source State Employees and enter the information requested:
  8. Click on Continue
  9. Click on From a Qualified Plan
  10. Continue answering the questions

On the State return portion: 

  1. In the Mississippi interview, look for a screen called Enter Any Other Income and Losses
  2. Enter the amount of the pension distribution as a negative number
  3. Enter the description of "MS pension adjustment"
casey-mercier
Returning Member

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

This is disappointing. i have filed my taxes this year and for the past 5 years have used turbo tax. for the ant of money i have been paying this should not happen. the employer name and number along with it being 1099 should be enough to identify this automatically. 

casey-mercier
Returning Member

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

Doesn’t give me the option to select the source State Employees 

BillM223
Expert Alumni

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

Where the pension comes from does not matter. All pensions are excluded from state income if the payments are not early distributions, and no pensions are excluded from state income if the distributions are "early distributions".

 

The thought that state pensions are never taxable is a misunderstanding of state law. 

 

The state of Mississippi says this,

 

“Is retirement income taxable?

​Generally, retirement income, pensions and annuities are not subject to Mississippi Income tax if the recipient has met the retirement plan requirements. Early distributions are not considered retirement income and may be subject to tax. ​”

 

See this Mississippi FAQ.

 

On the federal return, an "early" distribution is generally one in which the distribution is made before the taxpayer is 59 1/2 years old.

 

However, it is not clear that an early distribution on the federal level is also an "early" distribution for the State of Mississippi. But so long as your 1099-R has a distribution code of "2" in box 7, TurboTax will assume that the distribution is an early distribution.

 

I assume that on your 1099-R, the distribution code is "2". This describes the distribution as an early distribution. Therefore, based on the input, TurboTax is correctly marking the distribution as taxable in Mississippi.

 

However, the distribution is an "early distribution" for federal purposes, where generally retirement plan distributions made before the taxpayer is 59 1/2 are considered early.

 

What is not clear is if the state of Mississippi considers a distribution that is prior to age 59 1/2 to be an early distribution if the taxpayer has reached the full retirement age of the retirement plan.

 

Currently, TurboTax has no way of determining that the taxpayer has met the retirement plan's requirement.

 

If you are positive that the pension distribution should not be taxable in Mississippi, there are two workarounds:

 

The first is to change the distribution code to "7" on the W-2. This will cause the distribution to not be taxable in Mississippi. It will not affect your federal return (the distribution will still be taxed on the federal return, as it should be).

 

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dukes909
Level 3

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

The TurboTax "experts" posting on here are incorrect.  Many of us have contacted the state department of revenue as well as PERS.  TurboTax has it wrong this year. See this thread:

https://ttlc.intuit.com/community/retirement/discussion/turbo-tax-is-taxing-my-retirement-income-for... 

 

@casey-mercier 

ReneeM7122
Level 8

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

You are correct, retirement income should be excluded on a Mississippi state tax return.

Please try these steps to clear any entries that could be causing your Mississippi retirement income to be included in taxable income:

  1. Remove your State of Mississippi tax return. 
  2. Delete the 1099R in your Federal return. 
  3. Add the 1099R back again. 
  4. The retirement income should be excluded.

Here is how to delete forms:

  • Open or continue your return in TurboTax.
  • In the left menu, select Tax Tools and then Tools.
  • In the pop-up window Tool Center, choose Delete a form.
  • Select Delete next to the form/schedule/worksheet in the list and follow the instructions.

 

@dukes909

dukes909
Level 3

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

@casey-mercier 

 

 

 
 
 
 
 
Employee Tax Expert
 
Reply to message

You are correct, retirement income should be excluded on a Mississippi state tax return.

Please try these steps to clear any entries that could be causing your Mississippi retirement income to be included in taxable income:

  1. Remove your State of Mississippi tax return. 
  2. Delete the 1099R in your Federal return. 
  3. Add the 1099R back again. 
  4. The retirement income should be excluded.

Here is how to delete forms:

  • Open or continue your return in TurboTax.
  • In the left menu, select Tax Tools and then Tools.
  • In the pop-up window Tool Center, choose Delete a form.
  • Select Delete next to the form/schedule/worksheet in the list and follow the instructions.

 

DaveF1006
Expert Alumni

Is turbotax taking out state taxes in Mississippi on retirement income for Mississippi state govt retirees

Here is a better way to exclude your Mississippi retirement income in the 1099R.  You should be able to edit this without deleting the forms but if you as Dukes909 suggested, that's ok too. If you haven't deleted the form, skip steps 1-4.

 

In your federal return:

  1. In the search or find box, type in 1099-R
  2. Click on Jump to 1099-R
  3. Scroll down to Retirement Plans and Social Security
  4. At IRA,401(k), Pension Plan Withdrawals (1099-R), click Start (or Update)
  5. Enter your 1099-R or if you have entered it, click on Edit then Continue
  6. Answer the next questions until you get to the Where Is This Distribution From? screen
  7. Select the source Mississippi Employees and enter the information requested:
  8. Click on Continue
  9. Click on From a Qualified Plan
  10. Continue answering the questions.

[Edited 02-15-2021|05:18 PM PST]

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