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State taxes paid 8 years late

Eight years ago I moved from Colorado to Florida. My wife who was not working in Colorado at the time did cash in some of her 401k at the time we moped to Florida. Approximately a year later I Paid my taxes for 2001 and paid Federal taxes on her 401k distribution. I did not even think about the state taxes needing to be paid. Anyway Last year the State of Colorado came after us for the past due taxes plus penalties and interest. We finally settled for the original tax bill as they could not provide proof that any attempt had been made to contact us about the tax bill during the intervening 8 years .

My question is, will I be able to deduct these late paid taxes from 2001 on my 2009 federal tax return?

Thanks Ahead

Phil

Reply to
JaxKayaker
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You can deduct actual state income taxes paid. It doesn't matter that you pay late. You can't deduct your late payment penalties but it sounds as though you didn't have any.

Reply to
Alan

The deduction is for the year in which you paid the state income taxes. Your question implies that you made that payment sometime this month.

Reply to
Bill Brown

Phil, you didn't make it clear exactly when your wife took the distribution from her 401(k). If she took it while she was a Colorado resident, it was properly subject to Colorado tax. If she didn't take the distribution until after she moved to Florida, Colorado did not have the power to tax that income. Federal law (4 USC Sec. 114) prohibits states from taxing nonresidents on certain kinds of retirement income; distributions from Sec. 401 plans, including 401(k) s, are among the protected kinds of income. This law applies to distributions received on or after January 1, 1996. It does not matter where she performed the services to earn the income that was contributed to the plan.

Also I wonder about the statute of limitations on the Colorado assessment. Did you file a timely part-year resident Colorado return for 2001? Was the 401(k) distribution disclosed on that return? If the answers to those questions are yes, the Colorado assessment may have been time barred. I hope you had professional help in dealing with this matter with Colorado.

As for deducting the tax, as a cash method taxpayer you deduct state taxes when you pay them. It doesn't matter what year they apply to. Yes, you can deduct the tax on your 2009 federal return. Just remember that state taxes, like some other itemized deductions, are not deductible for AMT purposes, so the deduction may put you into an AMT.

Katie in San Diego

Reply to
Katie

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