topic Should I report my basis of retirement income as $6000 for the "specify the retirement income of $0 received from (non-deductible IRA contribution)"? otherwise PA taxes in Retirement tax questions

Should I report my basis of retirement income as $6000 for the "specify the retirement income of $0 received from (non-deductible IRA contribution)"? otherwise PA taxes

emc129xat2011 — Mon, 22 Mar 2021 16:21:55 GMT

This question comes up on my PA state income taxes regarding back door Roth conversion. The $6000 contributed to trad-IRA was not deductible (from post-taxed funds), and the $6000 went straight to Roth IRA few days later. Don't understand why PA is taxing this event.

Re: Should I report my basis of retirement income as $6000 for the "specify the retirement income...

ErnieS0 — Mon, 22 Mar 2021 18:19:03 GMT

Yes report a basis. Pennsylvania does not give you a deduction for IRA contributions so all contributions are after-tax. You will have a $6,000 basis if you contributed post-tax funds to a traditional IRA.

Distributions from an IRA are not taxable if the payments are:

Received, including lump sum distributions, on or after reaching the age of 59 1/2.
Paid to the estate, or designated beneficiary, of the participant by reason of the participant’s death.

Distributions you receive before age 59 1/2, even if you are retired, are taxable even if you receive substantially equal payments, and for federal purposes, you do not pay a penalty for an early withdrawal. Distributions from an IRA, including a federal Roth IRA, are taxable to the extent the distribution exceeds your previously taxed contributions. Further, under the cost recovery method, the taxpayer is required to remove his contributions first and then the untaxed portions.

Related resource:

How do I determine if my IRA withdrawals are subject to PA income tax?

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Re: Should I report my basis of retirement income as $6000 for the "specify the retirement income...

emc129xat2011 — Mon, 22 Mar 2021 18:30:15 GMT

Thanks Ernie. I got confused by the wording of the Turbotax online question. I think it was getting at whether the IRA distribution was of pre-tax or post-tax contributions. Since it was post-tax dollars in my case, then I didn't think it should be double-taxed on the distribution. Matching the distribution to the basis amount fixed the problem on my PA returns.