Massachusetts IRA distribution

[poster describes how MA does not allow a deduction for IRA contributions, even when federally-deductible. For completeness, I note that MA also disallows deductions for contributions to sole proprietors' qualified plans (SEP, Keogh, solo 401(k), etc).]

You keep track, on your own spreadsheet/piece of paper/etc. all the contributions you've made to an IRA/SEP/Keogh/etc. while you've been a MA taxpayer.

Correct. So roll your own.

-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us

Massachusetts audited me on this issue. (They didn't bother to tell me that they were auditing me; they just sent me a notice of intent to assess.) Speaking with the rep I got the feeling that that they expected me to pay rather than document the basis. They kept talking about 1099's as if those showed contributions. They didn't seem to know about

5498's (not that they would have gone far enough back to help much). And they really couldn't explain how I was supposed to document my (lack of) previous withdrawals. I sent them copies of brokerage statements for 20+ years showing my contributions (and by implication lack of withdrawals) along with a summary and balance. About a week before the deadline I called to see if they were happy. They couldn't tell me anything because the person who answers the phone--while part of the same "audit unit"--is in a different city from (and cannot communicate with) the people who receive the responses. He kept assuring me that I would get timely credit for my payment as long as I had proof that it had been received by the deadline. I kept explaining that I hadn't sent a payment but documentation of why I didn't owe anything along with a request for meeting if the evidence was not adequate. After a few iterations I proposed that I should send another copy of my response return-receipt. He said that I absolutely shouldn't do that because it would confuse them. I sent another copy of my response return-receipt and about a week after I received the receipt I received a notice that the notice of intent to assess had been rescinded. Dan Lanciani ddl@danlan.*com

In California, in the past there have been different deductible amounts for IRA's vs. federal (in other words, non-conformance). This sounds like your situation, only a difference in percent deduction disallowed (100% vs. a lesser percent). This is simply shown as an adjustment on schedule CA (540), California Adjustments. Suppose the IRA distribution for federal purposes was $10,000, but only $8,000 was previously tax-deductible for CA -- then you would simply show a "subtraction" adjustment of $2,000 on line 15 of the CA schedule. It could be tracked by a self-prepared worksheet, but no official form that I know of.

-Mark Bole

(Thanks for summarizing my post) So if a client comes in at

70, and has the 3 years returns that one saves (or even 7, no difference I guess), do you just go back and research the year IRAs started ($2,000 right?) and add up the assumed deposits, declaring that to be the MA 'basis'? If not that, what? I can't be the first to run into this. (you'd think the MA forms would track deposits) I understand your response, and suppose this would be a warning I'd give people just starting out, but it's the first this problem has come up for me. JOE

Why are you supposed to consider that a bad thing?

Seth

You might get your client to come up with forms 5498 he's gotten over the years from the IRA custodian. Or maybe the brokerage house/bank end of year statements which would show contributions. That's a start. ChEAr$, Harlan Lunsford, EA n LA

A lot of old timers here that I'm sure remember IRA's started in 1974 as 1500.00 and changed to 2000.00 in 1981. I've always kept a list of IRA contributions for this purpose and I always advise my clients to keep all tax returns forever.

40 days left, but who's counting!

Bill in Taxachusetts

I suppose I was to assume that such confusion would work against me. I thought it was a rather odd thing to say (let alone to repeat) but then we didn't seem to be communicating too well. I actually included a cover letter indicating that all the attached material duplicated my previous submission. Just in case. Dan Lanciani ddl@danlan.*com

Bill, are you calling me an old timer??? I just got on medicare, so I am not that old.... I remember it well... Missy Doyle

Moderator: And I'm 17 - only my body aged.

Was there also a complication when stay-at-home spouses could claim contributions? Some time ago our group had calculated the maximum possible contributions and the timing of their introductions so that we could help clients reconstruct their MA taxed contributions but we have since lost that information.

If someone can post a good reference for this (the annual IRA limits) that would be much appreciated. I now see that "schedules X and Y" one form for input on TurboTax, flow to the main forms, but this form doesn't print, even as a backup/worksheet. My person is nearly 80, and doesn't have records going beyond 7 years as all advice givers told her that was the limit of what she needed to save. Her now deceased husband had been taking RMDs for 15 years and so 8 years of withdrawals are now lost. JOE

The limits are available by googling: "Legislative History of IRAs". The CBO site gives a complete set of limits.

Hey, that's a great reference! Thanks!

Katie in San Diego