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Any way to tell a 1099-R was for a Keogh or Solo 401(k)?

Is there any way to tell solely from the 1099-R if a distribution was from a Keogh or solo 401(k)? Having read over the 1099-R instructins I think the answer is "no", but am wondering if I missed anything.

The reason I ask is this...

In its infinite wisdom, Massachusetts does not allow deductions for contributions to sole proprietors' Keogh or solo 401(k) plans (doesn't allow it for trad IRA or SEP-IRAs either). Thus the sum of all Keogh/solo 401(k)/trad IRA/etc. contributions ever taxed by MA create MA basis.

Then, when distributions are made, MA considers distributions from Keogh/solo 401(k)/trad IRA/etc. accounts to be recoveries of MA basis and so are non-taxable until MA basis is exhausted.

To do this computation, however, requires that one knows whether a given distribution came from a Keogh/solo 401(k)/trad IRA/etc. Such distributions are reported on MA Schedule X (after adjusting for MA basis recovery) while other pension and annuity income is reported on the "Pensions" line of MA Form 1.

It's easy to know if a 1099-R is reporting an trad IRA distribution -- the IRA box will be checked.

But what about Keogh/solo 401(k) distributions? As far as I can tell, those 1099-R forms are going to look just like 1099-R forms from "regular" 401(k)s, other qualified plans, pensions, annuities, etc.

Now, if the taxpayer has brought in a statement or whatever from the plan custodian one will be able to realize this right away. But if just the 1099-R is brought in and the taxpayer has no memory/clue about what kind of account the distribution came from...?

(And that's leaving aside whatever software shenanigans need to be done to get the income to go to the right places on the MA return and not simply have all IRA-box-not-checked 1099-Rs flow to the "Pensions" line on Form 1... 1/2 :)

Reply to
Rich Carreiro
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The 1099-R has an account number field in the bottom left. Maybe you can call the phone number, or ask the taxpayer to call the phone number, and ask what the account source/type is.

Are deductions for regular 401(k) allowed? If yes, then it is very complicated.

Also, if the taxpayer moves to MA and brings an IRA with them, the basis will be zero and all distributions will be taxable; but if they contributed to the IRA while living in MA, then their basis will be non-zero. This is complicated indeed.

How do you know how much the basis is? If the taxpayer is expected to keep track of their basis, they should also keep track of the type of account, year it was opened, etc.

Reply to
removeps-groups

the phone number, or ask the taxpayer to call the phone number, and ask what the account source/type is.

Yes, in Massachusetts, the regular 401(k) is pre-Tax. This raises new and troubling questions. A tracking I'd not considered as I planned to start a Solo 401(k).

Reply to
JoeTaxpayer

Then what if you started a solo 401k or SEP IRA or such in MA, and then moved to another state like CA. Is your full distribution taxable even though you didn't take a deduction for it in MA?

Reply to
removeps-groups

Yes, yes it is. As I understand it, if a person creates an LLC or a corporation sets himself up as the sole employee of the LLC/corp and gets a W-2, and so on, his 401(k) contributions and the company's profit-sharing contributions are deductible.

But if that same person, doing the same work, operates as sole proprietor, no deduction. I'd love to know the rationale for that.

(Actually, I bet without verifying that the "rationale" is... MA allowed a deduction for Keogh contributions made before 1975. So presumably in 1975 MA decoupled its law from the part of the IRC that covers Keoghs, but probably stayed coupled to the part of the IRC that covers qualified plans. And then when the 401(k) was "invented" (it's actually an interesting story -- what we call a 401(k) was not really intended by Congress -- or so the story goes), by being part of the whole qualified plan thing it got the deduction. But as I understand it, solo 401(k) plans are really a species of Keoghs and so are caught by the 1975 law that disallows the deductions).

Yup.

Yup.

Yup. :)

That is correct.

I don't see why they'd need to keep track of all that. They "only" need to keep track of all traditional IRA and Keogh/solo 401(k) contributions that MA taxed. (MA at least conforms to federal law on Roths. Thank heaven for small favors.)

Reply to
Rich Carreiro

Most likely. CA has no obligation to honor MA basis. And I'm sure they won't :)

Reply to
Rich Carreiro

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