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IRA Distribution

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Level 3

This is a continuation of my previous messages regarding distributions from Traditional IRA (Taxpayer) and Roth IRA (Spouse).

With regard to the Traditional IRA, Taxpayer received a 2019 Form 1099-R  for a distribution received. I recorded it and it was fully taxed on their federal tax return. It was a Total Distribution with a 1 in the Distribution Code Box. He is under 591/2 years old.

On the Massachusetts return it was not taxed at all as the amount of his contributions over the years (more than 5) was greater then the distribution.  

A 10% Additional Tax was also reflected on his Form 5329.  He does not qualify for any of the exceptions.

I appreciate your feedback on this.

 

I will provide information on the Spouse's Roth IRA Distribution in a separate post.

 

 

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Level 15
Level 15
You should really keep everything together in a single post, creating multiples posts on the same situation is too hard for people to keep track of.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 12

You've got this running three times, now. That's how you confuse the peer users that volunteer to be helpful.

Previously, you stated "his" was Roth:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/roth-ira-distribution/0...

Now you indicate Traditional?

And why start yet another topic for the Spouse; you already included the spouse here:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/re-massachusetts-ira-an...

 

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"Level Up" is a gaming function, not a real life function.
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Level 3

You may be confused as previous posts were for 2018.

I was trying to be helpful by separating Spouse situation from Taxpayer for 2019.

Can I conclude that the treatment of the Taxpayer's Distribution is correct...taxable on the federal return and not taxable on Massachusetts return?

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Level 12

"Can I conclude that the treatment of the Taxpayer's Distribution is correct."

For each condition (taxpayer or spouse, year, account type, basis at the time of the distribution, the amount of the distribution) you need to work through the details. I previously provided a link to the MA listing for all types of retirement plans and accounts and for how they treat the various types and taking into consideration the type of distribution:

https://www.mass.gov/service-details/view-non-government-pensions

No one except for you has all the required info.

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"Level Up" is a gaming function, not a real life function.
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Level 3

Here is the information on the Spouse with regard to her Roth IRA Distribution:

She is also under 591/2 and has had the plan for more than 5 years. I believe this makes the withdrawal a non-qualified distribution

Her 2019 Form 1099-R shows she had a Total distribution and a Distribution code of J.

Basic Program subtracted her Roth Contributions and included the difference on Line 4 b of Form 1040. There was also a 10% Additional Tax as she had no exceptions.

On the Massachusetts return her Roth Contributions were subtracted from the Gross Distribution and the balance was taxed.

Thanks for your help.

 

 

 

 

 

 

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Level 12

A Roth account with funds in there 5 years or more means there is no tax for removing your own contribution amount, but that is determined relative to Basis and Account Balance and the sequence of the distribution(s). Code J introduces the 10% early withdrawal penalty, unless an exception applies.

Have you entered the Basis? The Account Balance? The program needs all of this info to do the math.

Did you work through the Fed step-by-step as I provided already:

https://www.irs.gov/help/ita/is-the-distribution-from-my-roth-account-taxable

Then, confirm that same info for MA at the link I provided.

Otherwise, I'm not sure what you still are asking about. Sorry.

"subtracted her Roth Contributions"

If the distribution exceeds the basis in the account, then she took her own money and some earnings. The Earnings would be taxable. Or, the distribution does not exceed basis the prior year, but this year, what she took exceeds the remaining basis. That also means she took earnings. Earnings are taxable when you violate the regulations that would have made them not taxable.

 

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Level 3

After entering the 2019 Roth IRA information for the Spouse the following result was generated by the ProiSeries Basic program:

For both the Federal and Massachusetts returns the cumulative Roth IRA contributions (Basis) was subtracted from the Gross distribution as reported on the Form 1099-R.

This was a Total distribution.

Is this correct?

 

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Level 12

It seems correct. I would evaluate it like this: She is not being taxed again on her own post-tax money. That makes sense with what you have learned, right?

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"Level Up" is a gaming function, not a real life function.
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Level 3

Yes it does.

Thank you for your help.

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Level 12

"I appreciate your feedback on this."

What more do you need on this subject? There seems to be nothing wrong with the software.

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"Level Up" is a gaming function, not a real life function.