BUG: Massachusetts taxes and W-2 with nonqualifying plan income box 11

[dvdmrcs]

My W-2 has income Z in box 1, and the same value in box 11 "nonqualifying plans". I enter that in TT.

On the Fed form 1040. line 1 is ZERO, and the Z shows up in  Sched 1 line 10 as other income, which is copied to 1040 line 8 as Z. Everything is fine.

MA form 1 is screwed up. line 3 (w2 income) has the value Z.  It also copies the "other income" value Z from 1040 line 8 to MA Sched X, which is then placed on form 1 line 9: Z. Line 10 adds them all up so total income is 2*Z, or TWICE my actual income. It then calculates my taxes on this incorrect value, effectively doubling my MA taxes!!

I tried getting around this by going back to the entry for my W-2, and I changed box 11 from Z to zero. But TT doesn't propagate the zero to the other places in my tax form, they all still have the value Z, and my MA taxes are still twice what they should be. [next I will try DELETEing the W-2 form, and reentering it from scratch. If that doesn't work I'll have to start a new tax form from scratch, ugh!]

[BrittanyS]

To better understand what is occurring with your return, it would be helpful to have a TurboTax token.  The token provides a sanitized version of your return.  We will be able to see the numbers but not any personal information such as your name, SSN, or address.  

If you would like to do this, here are the instructions: 

In TurboTax Online, go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen, and you will get a Token number. 

In TurboTax CD/Download versions, go to the black panel on your screen and select Online. 

1. Scroll down and select Send tax file to Agent. 
2. You will see a message explaining what the diagnostic copy is.  Click send through this screen, and you will get a Token number. 

Reply to this thread with your Token number. 

We will then be able to see precisely what you are seeing, and we can determine what exactly is going on in your return and provide you with a resolution.

@dvdmrcs 

[dvdmrcs]

Token 

1097403

I have a dummy tax return with only a single W-2 with $400k nonqualified plan income box 11 (and box 1, and box 16 MA state wages).

Steps:

1. Edit the W-2
2. "continue" past the 2 W-2 screens
3. continue past "you're doing great"
4. uncommon situations : "none of these apply", and continue
5. Did you take money out of your nonqualified pension plan? screen. I did take the money out, so I click "yes", and "continue", and the MA tax goes crazy. [this is the condition of the tax form I sent you.]
1. 1040 line 1a wages is 0; line 8 Other income is $400k
2. MA Form1 line 3 is $400k because W-2 MA wages says $400k, but line 9 Other income (taken from 1040  Other income) is also $400k.
3. MA form 1 line 10 adds them together and gets $800k!! which doubles the MA tax.
6. If in step 5 I instead lie and say "No, this is money I contributed to my nonqualified or Section 457 plan.", the MA tax is correct:
1. 1040 line 1a wages is $400k; line 8 Other is 0
2. MA form 1 line 3 is $400k, and line 9 Other is 0, and line 10 total is $400k.
3. This is the workaround I am using so that my MA taxes are computed correctly by TurboTax.

So the MA tax computation doesn't know that the Fed computation has zero for 1040 line 1a.

By the way, the directions for sending you the form are wrong. There is no black panel on my desktop TT screen. I had to use HELP -> Send tax file to TT agent.

[BrittanyS]

Thank you for the token.  We are looking into the issue.  To clarify, you received wages of $400,000 as stated in box one of the W-2 and took a $400,000 out of a non-qualified plan which is indicated in box 11 of the W-2?

@dvdmrcs 

[dvdmrcs]

Hi Brittany,

My TOTAL income was $400k, from a non-qualifying plan. [note: the $400k is a made up number.]  The W-2 has that single $400k entered in 3 places: lines 1, 11, and 16. My W-2s have been that way ever since I have been receiving non-qualifying distributions.

This year is the first time that TurboTax has reacted differently to seeing a value in line 11.  You can try it in last year's version to see the difference.

cheers,

M.D.

[BrittanyS]

Thank you for clarifying.  Working through the return I was able to correct the error by deleting the W-2, updating the software and reentering the W-2.  Follow these steps in TurboTax Desktop to correct the error. 

1. Click Forms in the right upper corner
2. Click Form W-2 
3. Click Delete Form (this will delete from the federal and state)
4. Click Online
5. Click Check for Updates
6. Run Update
7. Click personal Income
8. Click I'll choose what I will work on
9. Click update next to wages and salaries
10. Reenter W-2

If you follow these steps and are still having issues, respond to this thread.

@dvdmrcs 

[dvdmrcs]

Hi Brittany,

The update works! The fix puts all of the non-qualifying in Other, and MA tax now knows not to add US Other AND state wages together - only uses Other.

I am not going to re-do my Actual return, since the version using my workaround has already been accepted by US and MA. (if they audit me, I'll have them talk to you so you can tell them about the bug 🙂  But TurboTax will work properly for me next year....

thanks!

Mark