401k

[gerardo47]

I get two 1099 one from a state with income tax and the other not work in two different states one solo 401k

How does software distinguish where the money is coming from

[NCperson]

@gerardo47 - a little hard to read what you wrote.   the software bases your state income tax on where you live or work - not where the payment comes from. 

what state do you work in?

what state do you live in?

what state does the 1099R withhold income tax for? 

[rjs]

What kind of 1099s do you get? There are 21 different kinds. There is no plain Form 1099. All 1099 forms have one or more letters after the 1099. The most common are 1099-INT, 1099-DIV, 1099-B, 1099-NEC, 1099-R, and 1099-G.

If you have a 1099-G or 1099-MISC, which box is the income in?

If you have a 1099-NEC or 1099-MISC, is it from an employer who also gave you a W-2?

NCperson and xmasbaby0 think you are talking about 1099-Rs for money that you took out of your 401(k) plans. Is that what it is? Or did you get 1099-NEC or 1099-MISC forms from clients that you did work for as an independent contractor?

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@gerardo47 wrote:

How does software distinguish where the money is coming from

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Where what money is coming from? Money that you took out of the 401(k), money that clients paid you for your services, or money you earned as an employee (on a W-2)?

[xmasbaby0]

If you mean you have two different 401k plans from which you are taking distributions, it does not matter what state it comes FROM.   You pay federal tax on the retirement income, and you may pay tax to the state in which you LIVE, depending on what state you are in.  Some states do not tax retirement income.  We do not know what state you live in.

But when you enter your 1099R into the software, the information will flow from your federal return to the state return.   Then the software will follow the rules of your state for your state return.

To enter your retirement income, Go to  Federal> Wages and Income>Retirement Plans and Social Security>IRA  401 k) Pension Plan Withdrawals to enter your 1099R.  You can add more than one 1099R if you receive two or more.

[gerardo47]

Okay so the 1099 is from a contracting company so it would be a 1099 NEC and it would be boxed to other income I'm not taking any distributions I'm talking about putting the money into the 401K so basically we're talking about two separate streams and incomes that are in form of 1099 as other income and basically one of them has a tax consideration because I worked in the state where there was income taxes in the other I did not how does the software adjust for that

[NCperson]

@gerardo47 - if I understand correctly, you have 1099-NECs - 

1) you reside in one state and have an 1099-NEC for work performed in that same state

2) you have a 2nd 1099-NEC work performed in a different state.  That state does not have income tax. 

For federal purposes, it doesn't matter, it all gets added together

for state purposes, the software will first figure out the tax in the state where you worked, but did not live.  

then it will figure out the tax for the state where you both worked and lived.  it always does the state where you reside last. 

If you had to pay state income tax in the state where you do not reside, the state where you reside will give you a credit for the tax paid to the other state so that you are not taxed twice on the same dollar. 

[rjs]

@gerardo47 

Income on a 1099-NEC is self-employment income, not other income. You have to report it as business income. And assuming that the total is more than $432 you will have to pay self-employment tax on it as well as income tax. If you report it as other income you will hear from the IRS.

NCperson assumed that you live in a state that has income tax, and did some contract work in another state that does not have income tax. But it's not clear that that assumption is correct. What state do you live in? What states did you work in? How TurboTax handles the income on your state tax return depends on the answers. We can give you more specific information when we know what states you lived in and worked in.

It's hard to understand your posts because you don't use any punctuation. In future replies, please at least put a period at the end of each sentence, and a question mark at the end of a question.

[gerardo47]

Hello

I was try to be clearer this time.

I live in a state with no income tax where I get a 1099 NEC. Let's say I make 40K.

I work in another state for 6 months where I do not live permanently and let's say I make 80K on a 1099 NEC and that state has income tax.

The gross total is 120K and I want to put whatever percentage of that amount is allowed in my solo 401k. Let us say calculated (employee and employer amount) is 40K. 

I would rather use the money from the state that had the 1099 NEC with state income tax. How do I alert the software that is where the money is coming from? I am not sure how to be any clearer than this?

[NCperson · Accepted solution]

@gerardo47 - it doesn't work like that.  for federal purposes, everything is added together, regardless of what state you earned the money in.  

for state purposes, it'll probably work out as you want, but what state is it?  Many states begin their calculations with the federal AGI (Line 11) which in your case will already have the 401k contribution removed. 

[gerardo47]

The state in question is Colorado

[NCperson]

@gerardo47 - it will work out as you intend.  CO begins its calculations with Federal Taxable Income (line 15) which already will exclude the contribution to the 401k.

[gerardo47]

Okay but is there anyway to specify the income used for the 401k is coming from Colorado?

What Colorado will do is see that I deducted my retirement contributions and look at my Federal AGI and Colorado income for taxes but I want the Colorado income to be the only source of income that I put into retirement. Wyoming is the other state with no income tax and I do not want to use my 1099 income for retirement from this state. Does the timing of contributions matter? For example if I contribute before I move to Colorado to work for my 1099 I cannot claim this is Colorado income being used for retirement? How does the software register this?

Thank you

[DianeW777]

Your scenario is not unusual.  Contributions to a 401(k) are allowed based on the income earned. Your income earned and 401(k) contributions must be prorated based on the income earned from each state. The fact that your resident state does not have an income tax does not change the requirements to report the appropriate income allocable to each state.

 When you prepare your nonresident state (CO), TurboTax will walk you through the questions so that the income is properly taxed in that state.  The link below will provide additional guidance.

• CO Part Year Residents and Nonresidents