In TurboTax Online, at the screen Where is your distribution from?, did you select Pickup contribution?
Click Learn more which states:
P - Maryland state pickup contributions, limited to the taxable distribution for this year. Any excess can be carried forward to future years.
Maryland Income Tax Administrative Release Number 21, page 2 states:
Formerly, employees who contributed to the systems paid taxes on their compensation, including those amounts contributed to the Retirement System or Pension System.
Under the pickup program, the employer is considered to have “picked up” the employee’s contributions, i.e., the contributions are treated as if the employer made them for federal tax purposes.
The employee’s compensation is reduced, pre-tax, by the amount of the contribution picked up by the employer.
The pickup contributions are not taxable for federal purposes until they are distributed or made available to the employee.
For state income tax purposes, however, the pickup contributions are added to federal adjusted gross income in computing Maryland adjusted gross income pursuant to
Tax-General § 10-204(f).
The reason for the addition modification is that the amounts reported in Box 1 of the federal Form W-2 do not include, in salaries and wages, the contributions picked up
by the state.
In order for the state to tax the pickup amount as required under law, an addition modification is provided.
Is the retirement system by whom you are paid a 'participating governmental unit'? A list of approved units are included in the Administrative Release above.
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