What do we enter on Turbo Tax on the Massachusetts Taxable IRA Distributions page?

[lallifamily1975]

Both of us received Traditional IRA distributions in 2018 and TT is asking "To determine the taxable amount for Massachusetts, enter the following information: 1) Other Contributions previously taxed by MA  2) Total Distributions received in previous years"

What do we enter for #1?
I'm guessing for #2 we have to add up the distributions we received in 2015 and 2016? Is that correct?   When we leave it blank TT actually lets us continue right along and will even allow us to submit our taxes but I think that might be a bad thing to do.
thanks!

[DanielV01 · Accepted solution]

Massachusetts does not allow a deduction for a Traditional IRA from taxable income.  Therefore, when you receive distributions from a Traditional IRA from Massachusetts, you do not pay tax on any of the distributions until you have first distributed out your Massachusetts after-tax contributions.  These are the contributions that you made while living in Massachusetts throughout the years that did not reduce your Massachusetts taxable income.

So for Question #1, you hopefully have a record of all the contributions you have made to the IRA while living in Massachusetts.  Distributions that are a recovery of basis are not taxable in Massachusetts, (because they were never deducted originally).  Growth, however, is taxed in Massachusetts, as is the recovery of contributions made while living in another state, because these contributions were never taxed in Massachusetts.

For Question #2, you are correct.  You should enter in the distributions you had in previous years because Massachusetts wants to track your nondeductible contributions to recover these as nontaxable distributions.  Once the original contribution basis has been fully recaptured, your IRA distributions from that point forward are taxed in Massachusetts.

[lallifamily1975]

Thank you for clarifying although I'm still a bit confused.
Would you know for both Questions #1 and #2 do we need to include contributions/distributions from a Rollover IRA (i.e. money from each of our work 401K accounts which we rolled over into a Rollover IRA) or do we just include the contributions/distributions from Traditional IRA's that we contributed to outside of work 401K's?
Calculating the distributions for the answer to Question # 2 can be easily accomplished but we do not have a complete list of dollars contributed to our Traditional IRAs.  Any suggestions what to do?

[DanielV01]

#1:  Only the contributions/distributions made directly.  These contributions were not deducted from taxable income when you made them, but the deferrals to the 401(k) were excluded from taxable income, even in MA.  When rolled over, the 401(k) continued to be tax-deferred, so the amount of the rollover did not increase the after-tax basis of funds contributed to the IRA.

#2.  That may take some research.  If you contributed with the same plan administrator, they may be able to assist you to track all of your after-tax basis contributed throughout the years.  Your basis is only the original amount you contributed because you did already pay tax on that.  Growth is tax-deferred income, however, that is taxable upon distribution.

[Zbucklyo]

An excellent response by Daniel.  One thing to add.  If the Traditional IRA contributions were originally made in a state other than MA, do not include them in #1.

[lallifamily1975]

Wow Daniel!  I need to digest all this and see if I have any other questions.  Many thanks!

[DanielV01]

We're here to help if you need it.

[toddmkatz]

I realize this question was answered long ago but I have a related question.

If I understand this matter correctly there is a difference in how Mass and the Feds recover basis that was never taxed. Mass wants to recover it all upfront with the initial distributions. The Feds will recover it gradually over the years as distributions are made. 

Is this correct?

[jasisman02360]

This article is very helpful BUT I'm 89 years old! 

I have NOT made contributions for over 50 years.

I have been taking distributions in MA for 10 years and have no idea the total amount. 

PLEASE HELP

[MarilynG]

If you contributed to your retirement plan through your employer with payroll deductions, these are 'pre-tax' contributions, so are taxable when you take them out (this is the case with most people). 

If this applies to you, leave those boxes asking about 1) Other Contributions previously taxed by MA  2) Total Distributions received in previous years blank. 

If you contributed funds on your own, those 'after tax' contributions are not taxed in Massachusetts when you take them out. 

If this applies to you, you would need to know the amount of these 'after tax' contributions so that MA knows when to start taxing your withdrawals. 

This will be noted as the difference between Box 1 (Gross Distribution) and Box 2a (Taxable Amount) on your 1099-R.

@jasisman02360