California form FTB Pub 1005 Adjustments to IRA, Pension, Annuities

[WJG1]

I live in California and am having problems with the Wage, IRA and Pension Adjustments worksheet. This is the first year I have taken a required minimum distribution. Between the years 1982 and 1986 I made contributions to an IRA. I deducted a total of $10,000 from my federal returns for those years and a total of $1500 from my state return for those years. The difference is $8500. I should be able to reduce my taxable required distribution by $8500 for this year. I am using the worksheet found in FTB Pub. 1005. Based on this worksheet, I should be able to take the $8500 as a deduction for this year ( Form CA adjustment line 4(a) col B). I am getting an error in TurboTax “IRA Adj – Col B total is too large”. Anyone out there having a similar problem?? Thanks.

[Mothercat81]

I subtracted the State Tax amount from the Federal on the IRA.

I subtracted the State Tax Amount from the Federal on the Annuity.  It also asked for the Pension.  On one Pension, the

Ca. Public Employee Retire, there is a Federal deduction, but no State.  Other Pensions have no Federal or State  Tax deductions.

How do I report the "adjustment" on the PERS & others.  Also, I do not have records on the PERS from 1986 - 1988.  Please advise.  Marlene

[KathrynG3]

I think that the unexpected results are from partial details.

First, if your IRA's were deductible or nondeductible, that matters. It would appear that the 1982-1986 amounts are deductible and should rightly be subtracted. 

Second, the records from 1986-1988 may matter. Contacting PERS is your best option to resolve those details to verify that there were no Roth IRAs, for example, that were nondeductible.

Assuming your calculations are correct, do not adjust anything on the federal. Enter the 1099-R exactly as you received it.

I recommend going first to the Federal and deleting and re-adding Form 1099-R if you have any trouble at all with restoring the 1099-R to exactly what you received.

To do this, follow these steps:

• From the left menu, select Federal
• Wages & Income and scroll down to your 1099-R entry. Click Edit/Add
• Click Delete next to it and confirm your decision
• Click + Add 1099-R and re-enter it again

Next, go to California. Follow these steps:

• From the left menu, select State
• Continue and Continue
• Go through the state interview again
• There will be a list of income that California handles differently. Select IRA Distributions
• On the screen Any IRA Distribution Adjustments? Enter your Description, such as IRA Distribution CA taxable amount<Federal, and enter 8,500 in as a Subtraction and click Continue

To reference your research in case others are experiencing similar issues~

From FTB Pub 1005 page 5 and 6:

1987 Through 2001 California law is the same as federal law. The IRA deduction is the lesser of $2,000 or 100% of your compensation. For a SIMPLE IRA, an elective deferral may be made for up to $6,500 for 2001 and $6,000 for 1997 through 2000.

1982 Through 1986 California law was different from federal law. The maximum federal deduction for an individual was $2,000, and was available to active participants in qualified or government retirement plans and to persons who contributed to tax-sheltered annuities. The California IRA deduction was the lesser of $1,500 or 15% of compensation with an additional deduction for a nonworking spouse, for a maximum deduction of $1,750. An IRA deduction was not allowed if you were an active participant in a qualified or government retirement plan or contributed to a tax-sheltered annuity.

Nondeductible Contributions Made Before 1987 If you made nondeductible contributions before 1987, none of your distribution is taxed until you have recovered your pre-1987 basis. Because there was a difference between federal and California contribution limits before 1987, there may be a difference in the California and federal taxable amounts. If there is a difference, make an adjustment to reduce your federal AGI to the correct taxable amount for California. Your adjustment is the lesser of your pre-1987 California basis or IRA distribution included in federal AGI. Use Worksheet I — Part A on page 13 to compute your pre-1987 California basis. Use Worksheet I — Part B to compute your adjustment to federal AGI and your remaining pre-1987 California basis. See Example 1 and Example 2 on page 7. Use Worksheet II on page 13, as a summary of your California basis and its recovery. If you have more than one IRA account, combine all your IRAs to complete the worksheet. If both you and your spouse/RDP have IRAs, you each must complete a separate worksheet based on your own IRA contributions, deductions, and distributions.

[teresamorgan0301969]

Thank you @KathrynG3 

[PAToney]

This is a little confusing to me. I was also making IRA contributions in those years and live in California. I am retired and taking pension payments. Initially they did not withold anything for state or federal I changed both to have funds withheld for taxes.  So I do have federal and state witholding on my 1099-r. My box 16 is blank. Does this mean I should show box 2b as a subtraction in turbotax when it asks about pension adjustments for my california filing? Or is it more complicated than that? 

[MarilynG]

You may not need to enter anything for California Pension Adjustments.  

On your 1099-R, compare the amounts in box 1 (gross distribution) and box 16 (state distribution) to see if they are the same or different.

In your California return, on the screens, Any IRA Distribution Adjustments and  Any Pension or Annuity Adjustments, please do the following:

• If box 1 and box 16 are the same, enter nothing and click Continue.
• If box 1 is higher than box 16, enter the difference in the Subtraction column.
• If box 1 is lower than box 16, enter the difference in the Addition column.

In your case, since Box 1 higher than Box 16 (blank), go back to your 1099-R entry and enter the amount in Box 2a in Box 16.

Then compare Box 1 and Box 16.  If the amounts different, enter the difference as either a 'Subtraction' or 'Addition' for California Pension Adjustments.