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MY39
New Member

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

Turbo tax is including distributions from roth accounts as taxable income on Mass state taxes when they are not taxable and were also treated as non taxable when completing federal returns. Please advise how to rectify my state tax return on turbo tax.

10 Replies
JohnB5677
Employee Tax Expert

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

There are two conditions that are required to be Non Taxable in Massachusetts.

  1. You must have had the ROTH for over 5 years.
  2. You must be over 59 1/2

Be sure to indicate that this is a qualified plan.

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teetimerm
Returning Member

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

Have the same problem.  Items 1 and 2 are true and indicated that it is a qualified plan.  Still being taxed on the Roth distribution.

 

  1. You must have had the ROTH for over 5 years.
  2. You must be over 59 1/2

Be sure to indicate that this is a qualified plan.  (I did).

PaulTaxes
Level 2

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

I have the similar issue.  Mom had Roth IRA.  It was started before 2015 and She was 90 years old when she died in November 2018.  I inherited the Roth IRA in 2019. I am 70 years old. I’m not being taxed Fedrally, but even if I check the Qualified box in TT, Mass still seems to be taxing me on this distribution.

PaulTaxes
Level 2

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

More info from PaulTaxes: 1099-R has code “T” in Box 7, indicating that the distribution is Roth.

KathrynG3
Employee Tax Expert

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

It depends. Carefully answer the questions following the 1099-R and indicate that the 1099-R was inherited. 

 

At the screen for Massachusetts Special Handling About This 1099-R, indicate that the category that best fits the 1099-R. Then, second, when TurboTax asks you to enter any other Massachusetts information, remove any entry from Massachusetts Distribution Amount and click Continue.

PaulTaxes
Level 2

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

I will go back and try this, but what I did do follows.  Actually before I say what I did, it is relevant to state that I inherited both Roth and traditional IRAs. Both we fully liquidated before end of 2019. TT shows me owing tax on the traditional and not on the Roth (correct as I understand it). Mass shows me owing tax on both (incorrect as I understand it). 

I went to forms: Massachusetts Form X - I found the line where the total of my 1099-Rs entries were noted. I subtracted the Roth distribution and now the line matched my IRS return. My tax owed in Mass changed. I figure this is sufficient. Not sure if I will get an error message from TT, though.

JohnB5677
Employee Tax Expert

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

Please note that Massachusetts does not allow you to deduct contributions to a traditional IRA in the year that they occur.  When going through the questions you must have totaled those contributions and enter them as contributions previously taxed by Massachusetts.

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PaulTaxes
Level 2

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

Still unsure if MA wants to tax my Roth distribution.  Can’t see why, but tax laws are funny.  Maybe it has something to do with the fact that Mom died in 2018.

 

For the tradition IRA, she took and paid tax on the RMD in 2018.  I totally liquidated it in 2019 and owe Fed and MA tax on this.

 

For the Roth, no tax event in 2018.  I liquidated in 2019 after inheriting it.  As far as I can see there should be no taxes due on this money, Feedral or MA.

DaveF1006
Employee Tax Expert

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

Check to see if there are Roth earnings being taxed. Taxable earnings can occur if you did not hang on to the Roth account for at least five years. It's called a 5-year holding period.

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msf50
Returning Member

Massachusetts Taxes: Turbo tax is including tax free roth distributions as taxable income

You have to put these distributions as previously taxed on MASS form X it seems to not have them taxed -not sure what that implies for earnings on a Roth though.

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