Taxable portion of IRA - Massachusetts state return

[AdkDB]

The taxable portion of my 2022 IRA distribution for federal purposes is $3,287. However, none of this is taxable on my Massachusetts state return because IRA contributions are not deductible on my state returns, and I have not yet recovered my basis (the amount on which I have previously paid Massachusetts taxes.) What I need help with is the confusing Turbotax page I have landed on, headed "Taxable IRA/Keogh Distributions". There are three boxes where I can enter data: (1) "Total IRA/Keogh plan distributions, qualified charitable IRA distributions, and Roth IRA conversion distributions received after excluding non-taxable disaster related adjustments" (the box comes with $3,287 pre-filled), (2) "Other contributions previously taxed by Massachusetts", and (3) "Total distributions received in previous years". 

I am confused by these ambiguous descriptions. For (1) my total IRA distributions was $3,287, but what is (2) Other contributions? My distributions previously taxed by Mass was $3,287, but is that what TurboTax is calling "contributions"? And what about box (3), total prior year distributions? Is this total gross distributions, or total amount taxable by Mass? The bottom line is: what do I put in these three boxes so that my $3,287 2022 federal taxable IRA distributions are not taxable by Massachusetts? This page is too confusing/poorly labeled for me to really understand what the tax software is getting at. Thank you!

[JohnB5677]

Yes, I can try to help explain it.

(1) "Total IRA/Keogh plan distributions, qualified charitable IRA distributions, and Roth IRA conversion distributions received after excluding non-taxable disaster related adjustments" (the box comes with $3,287 pre-filled), 

• This is the current distribution.  This will be combined with item (3) and compared to what you called the basis to determine when the basis is depleted.

(2) "Other contributions previously taxed by Massachusetts", and 

• This is what you called your basis.

(3) "Total distributions received in previous years"

• This will reflect all of the previous distributions that were taken.

(4) My total IRA distributions was $3,287, but what is (2) Other contributions? My distributions previously taxed by Mass was $3,287, but is that what TurboTax is calling "contributions"? 

• Item (2) is the sum of all of the "IRA" contributions that you made.  The $3,287 will offset that amount, and not be taxable.

(5) And what about box (3), total prior year distributions? Is this total gross distributions, or total amount taxable by Mass? The bottom line is: what do I put in these three boxes so that my $3,287 2022 federal taxable IRA distributions are not taxable by Massachusetts?

• The $3,287 will become part of that number in 2023.  It reflects the total of all distributions taken in past years.

(6) This page is too confusing/poorly labeled for me to really understand what the tax software is getting at.

• I hope this helped.  If this does not completely answer your question, please contact us again and provide some additional details.

[bmartin112]

Please provide an example for this page. We have the same concern, we did not understand the explanation provided by turbotax expert.    Where do we get the information to populate the questions  "other contributions previously taxed by MA"  and " total distributions received in previous years"  thank you

[AdkDB]

Hello, I am happy to try to help you with this, but I posted this question almost one year ago and so I am a bit rusty on this. I just looked at my 2022 tax software but I could not locate the place where this information is in play. So I will try a hypothetical example and you will have to wing it from there. Let's say that you made two $5000 IRA contributions in the past but they were not deductible on your state taxes. The total of $10,000 is your state tax basis in the IRA's. Let's say you got a distribution of $3,000 two years ago. It would not be taxable because you have not yet received your $10,000 back. Your remaining basis is $7.000. Last year you withdrew $8,000. Your taxable portion is $1,000 and the remaining $7,000 is the return of your original non-taxable contributions, or your net remaining basis. This is where the tax software confuses me. Unfortunately I cannot see the posting while I type this, so I cannot really see the details. But basically, you want to end up with $1,000 as taxable on your state return. Box 1 would be $8,000 (last year's distribution). Box 2 could be $10,000 (total original basis) and box 3 $3,000 (distributions received in years before last year). This should give the desired result of $1,000 taxable for the tax year you are working on. If for some reason this doesn't work, you could try the following: Box 1 $8,000, Box 2 $7,000, Box 3 $0. The net result should be $1,000 taxable for the tax year you are working on. Good luck.