Roth IRA dist being taxed by State

[petronin]

Hello,

In 2019 I took distributions from an inherited Roth IRA. On the 1099-R, it showed the gross distribution correctly and the taxable amount as $0.00. (which is correct, imho) Unfortunately, they entered a code T, which means they do not know the original date that the Roth was opened. It was well before 2014, but I guess they didn't show that. 

For my federal taxes, TT is correctly ignoring the distribution from my income. Unfortunately, it is adding that to my income for Massachusetts. I answered all the questions, saying it was an inherited Roth, my father passed in 2018, the previous owner opened it prior to 2015, and no, it does not qualify for a Disaster Distribution. But it still is counting it as income. Any suggestions on what I am doing wrong or how to tell TT that it is not taxable in MA?

Thanks
Mike

[KatrinaB48]

There must have been a five year holding period prior to 2018. Please view the Massachusetts revenue page for more information about this rule. If he does meet the requirements, I would revisit the interview section and make sure you have answered the questions correctly.

[petronin]

Thanks for your reply. The Roth was opened prior to 2010, so the waiting period is definitely over. 

Here are my answers to all the questions:

1) Does the 1099-R fit any special category: "none of the above"

2) Did you inherted this IRA: "yes"

3) "Someone else who passed away"

4) Person: "David" Year passed away: "2018"

5) If David first opened a Roth IRA account prior to 2015, it's considered a "qualified distribution"

  I chose: "David first opened a Roth IRA before 2015."

6) Was this a Qualified Disaster Distribution? "No"

That is the last question it asks and it pops me back out to the overall 1099-R entries. It still shows the money from the Roth distribution on my state income. How could I have answered those questions differently?

Thanks
Mike

[ThomasM125]

Sometimes the summary worksheets in TurboTax will show pension distributions as income, but that does not necessarily mean it is taxable income as it shows on your tax return.

You can preview the summary of your state tax return to make sure the income is not showing as taxable on your return as follows:

First, make sure you are working in your state return in TurboTax, then do the following:

1. Find the "Tax Tools" option on your left menu bar and click on it

2. Click on "Tools"

3. Click on "View Tax Summary"

[petronin]

It is definitely reporting it as income. I can tell by the massive bill it says I owe Massachusetts. 🙂

Thanks
Mike

[ThomasM125]

To exclude the distribution from MA taxation, the IRA would have to have been held for five years, and would have to meet one of the following conditions:

1. You are at least 59 and 1/2 years old when you took the distribution

2. You are disabled

3. The distribution is made after the death of the original owner

4. The distribution is paying for a qualified first home

So, in your case it seems the five year holding period would be the key, did you reflect that properly in the program?

[petronin]

I answered the question that it was opened before 2015, so yes: TT should know that it was opened for more than 5 years.

[JohnB5677]

This issue is not resolved in the federal input screens, but rather in the Massachusetts State questions.  As you go through the MA state information you will eventually come to a screen

Taxable IRA/Keogh Distributions.

This is where you will enter your previously taxed MA information

[petronin]

Yes, that was it. Thanks for the replies!