Massachusetts tax shows back door roth conversion as income

[bhim80]

since you declare that you already paid tax, back door roth conversion amount is not taxed in massachusetts tax ; however this amount being shown still as income in the summary of tax form. would it cause any problem?

[JohnB5677]

Please clarify what you are rolling over?

• Is it an IRA to a Roth/\? or
• Is it a 401-K or another qualified plan to a Roth?

[bhim80]

Nondeductible IRAs are converted into Roth IRA with out any further  tax burdens , which is called backdoor roth conversion. involves two steps: pay to non deductible IRA and then convert it into Roth IRA immediately. So, that  money is converted ,( not distributed). Turbotax is showing it also as income, even though you can make turbo tax not to estimate tax on that.  But, turbo tax is showing it along with other income as though it is additional income, which  may cause problems with MA Revenue dept.  

[DanaB27]

During the MA state interview, you can enter the amount previously taxed on the "Taxable IRA/Keogh Distributions" screen. Enter the nondeductible contribution amount under "Other contributions previously taxed by Massachusetts"

@bhim80

[bhim80]

That is what I precisely did; So, no tax is calculated on that amount for MA tax (non deductible IRA converted to backdoor Roth ORA). That is good ; however, in the summary at the end of the state tax return,  along with W2 amounts, turbo  tax shows this amount also as additional income. It implies as though, this is additional income above and over w2s, which is not the case. This is part of  already tax paid income of w2. My question is, would this create a problem, as though I did not pay  tax on that amount?

[GeorgeM777 · Accepted solution]

No, it should not cause a problem assuming the funds used for the back door Roth IRA conversion were after-tax dollars that were essentially deposited into a traditional IRA for the sole purpose of funding your Roth IRA.  Moreover, the TurboTax summary pages are not forwarded to the IRS.  What is forwarded to the IRS is your federal return, schedules, and MA return.  

To follow-up on the comments from @DanaB27, while the summary may show your back door Roth IRA conversion as additional income, what is most important is whether your MA return shows it as taxable income.  It appears from your question that your MA return does not show the Roth IRA conversion as taxable income and that is what we want to see on your MA return.  

@bhim80

[bhim80]

Thank you very much.  Appreciate the clarification.

[apple-Sweet-z]

Thank you all for the questions/ replies. They are very helpful.
My situation is a little different:

I have been doing Backdoor Roth conversion for a few years. Then moved to MA in 2020. I had no issue for 2020 tax return as I was “non-resident”.

I have Never taken any distribution from Roth, and basis for Traditional IRA is 0.

This is the first MA return as an “MA resident”. 
under “ Taxable IRA distributions“, “other contributions previously texted by Massachusetts” - - my Roth conversion amount seems to be taxed by MA no matter I place “0” or 6000 in here. 

”Total distributions received in previous years” - - I have placed the sum of previous conversions , which I believe is the  distributions. 

could this be the reason?

how may I avoid the double tax by MA? 
Your help is much appreciated. 

[JohnB5677]

This is a different issue from what you think.

Taxable IRA distributions, “other contributions previously texted by Massachusetts" are the value of the excess contribution to your traditional IRA that you accumulated while living in Massachusetts.  From above this is $6,000.

”Total distributions received in previous years” is "0" because none of those distributions were made in Massachusetts. This was the first.   Again, this is from the traditional IRA.

[supertech]

This is very annoying and I have the same issue.

[Sps1981]

To follow up on this issue, my federal returns look fine for backdoor IRA, however in my MA state return, schedule X shows this amount as taxable roth IRA distributions and when i look back state return line 9 that amount me and my wife contributed $12000 is added to line 3 which is wages and tips, salaries. So am i being taxed twice here for MA state returns? 

I can't even remember how i did the taxable ira/keogh section now. I was under the impression it was automatically transferred from the federal returns and filed it. 

What should i do or enter to make sure this $12000 is not being added as taxable income on the online software and how can I amend it? Please help!!

[CYL]

I found the same issue of $6000 already taxed Roth IRA conversion money being taxed by MA.

After trying a few things, I believe there is a bug in the linkage of Form1NR/PY with schedule X.

1. Schedule X has the $6000 logged as previously taxed by MA and line 7 shows "0".

2. Form 1 NR/PY line 11 does not react to any changes on schedule X. Still carries $6000 as other income.

3. side note: Form 1 NR/PY line 11 says other income from schedule X line 6. While latest from from mass.gov says line 7 which is correct. 

Please advice how the $6000 can be removed without overriding the number. 

[CCZZ]

Thank you @DanaB27 for your help.  A follow-up question on that. Should the backdoor conversion of IRA to ROTH be also included in the "Other contributions previously taxed by Massachusetts"? 

In Federal return, the conversion is differentiated from contribution. However, it looks if not included here in MA, the conversion will be double taxed by MA.

[DanaB27]

Yes, you will enter the traditional IRA contributions that were previously taxed in MA in the "Other contributions previously taxed by Massachusetts" field.

@CCZZ 

@CYL 

I cannot recreate your issue. It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

The instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

[CYL]

@DanaB27 Thanks for your kind reply and prompt actions. Token number is 1132048. Hoping to hear back before the filing deadline. Cheers.