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Massachusetts IRA and Roth IRA distributions

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Level 3

Taxpayer received a Form 1099-R reporting a Gross distribution for 2019.  It appears that his contributions over the years is greater than that distribution.  Does that mean that although the distribution is taxable on the federal return, none of it is taxable on the state return after subtracting his contributions over the years since he did not get a state deduction in those years.  Do those amounts get listed on Schedule X of the Massachusetts return on Line C - Total contributions previously taxed by Massachusetts?

In addition his spouse received a Gross distribution for 2019 from her Roth IRA. Since she got no deduction for those contributions, do they also get subtracted on the same line C of Schedule X of the Massachusetts return resulting in only a portion of the distribution being taxed by the state?

Thanks.

 

 

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Level 12

Let's take this a bit at a time:

"It appears that his contributions over the years is greater than that distribution."

How do you consider that this applies to anything? Did he take the entire balance? Or, is the distribution not the full account balance? Because yes, over time, you tend to take distributions that are other than the full balance, and the full balance will reflect contributions +/- gain/loss. Nothing about the distribution of the Roth is compared to the contribution (basis), unless you have some other considerations, such as the person is under 59 1/2 and the funds in this account are newer than 5 years. Are any of these conditions present?

"Does that mean that although the distribution is taxable on the federal return,"

What makes this Roth distribution taxable? Roth distributions typically are not taxable, so you haven't given us some important details, apparently.

"none of it is taxable on the state return after subtracting his contributions over the years since he did not get a state deduction in those years."

Roths are funded with post-tax dollars, so there is no deduction for making them.

I would have to skip the MA question, since I don't know MA, and since some info seems to be missing here. Sorry. You can go to this link and scroll/find the Roth section:

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

"In addition his spouse received a Gross distribution for 2019 from her Roth IRA. Since she got no deduction for those contributions,"

Because Roth contributions are post-tax dollars. There is no "since" about it.

"do they also get subtracted on the same line C of Schedule X of the Massachusetts return resulting in only a portion of the distribution being taxed by the state?"

The portion distributed is only taxable based on failing to meet one of those Roth "rules."

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Level 3

Both taxpayer and spouse are under age 59 1/2.

Sorry I did not indicate that.

 

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Level 12

"Both taxpayer and spouse are under age 59 1/2."

Which means they might have nontaxable and/or no penalty distributions, if the distributions meet specific reasons or amounts. Or, for a specified purpose, such as home purchase provisions. And, the five-year rule. And any conversion timing considerations. Otherwise, the earnings would be taxable, but not their own basis. I don't see where you addressed that the distributions were the full balances of the accounts. As I pointed out, this is typical: "It appears that his contributions over the years is greater than that distribution." If the entire account balance doesn't reach his basis, then he lost money, which means there are no earnings to tax. What about conversions?

"As the provision relates to conversions, each conversion has its own five year period of time that begins with Jan. 1 of the year in which you made the conversion. If you do end up taking money before the five years is complete, the IRS treats the order of withdrawals for Roth IRAs to starts with contributions, followed by conversions and then earnings."

The phrase you are trying to confirm is "qualified distribution."

I would start with the steps provided here:

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

And the Retirement/IRA/1099-R worksheet in the software should walk you through most of what you asked.

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