Michigan State Income Tax on 72t distributions.
L1: Michigan State Income Tax on 72t distributions.Reading the instructions for MI1040, Schedule 1, line 12, it sounds as if at least part of my distribution from an IRA under 72tcan be subtracted from my incomeforMI Income tax purposes. The distribution code on 1099R box 7 is 2, with the IRA/SEP/Simple box checked. The verbiage in the MI1040 Instructions makes me nervous. Any help would be appreciated.2009-02-06 18:29, By: Ex-MX, IP: [18.104.22.168]
L2: Michigan State Income Tax on 72t distributions.I’m not familiar with MICH tax rules, but could it be as simple as reminding you that any “after tax” money that is now being taken out of your IRA has already been taxed, so it can be excluded? KEN2009-02-07 14:21, By: Ken, IP: [22.214.171.124]
L3: Michigan State Income Tax on 72t distributions.The line 12 instructions for MI1040 at the Michigan Treasury web site say that “Qualifying retirement and pension benefits….may be excluded”, and goes on to specifically identify several qualifying benefits including “IRA distributions…..described by section 72(t)(2)(A)(iv)”.A few paragraphs later is notes that the exclusion is limited to $43,440 for individuals or $86,440 for married filers.If your withdrawing under a 72(t) plan, it appears as though you can exclude that income, up to the limits listed.2009-02-07 15:41, By: Mark, IP: [126.96.36.199]
L4: Michigan State Income Tax on 72t distributions.Yes, the exclusion for SEPP distributions applies in Michigan. The limit for joint filers is 86,880. The exclusion is not limited to those shown with a “2” code on the 1099R if the plan properly qualifies for the exception, but is coded “early or 1” on the 1099R, as long as a 5329 is attached to the federal return correcting the 1099R coding.If the SEPP is ever busted, resulting in retroactive penalty on the federal return, I wouldexpect that MI wouldrequire an amended return adding the taxable income back for years that are not closed tax years. However, if this applies to anyone, they should check into any MI treasury rulings that clarify or define what is required if the SEPP is busted. In certain cases, in order to receive tax free income in MI, a SEPP plan may be attractive enough to implement one in some borderline situations.2009-02-07 19:43, By: Alan S., IP: [188.8.131.52]