Ok - I am aware that any advice that might be given here should be taken as only advice, non-binding and that MMMV. I am aware that I should consult a CPA or tax planner, and so on.
Mods, if you feel this thread is inappropriate, please close it and I will continue searching elsewhere for my answer.
Now,
For tax year 2002 I lived in Georgia from January 1 to August 2, then relocated to Tennessee. I have not worked since I moved to Tennessee. I did work full time in Georgia and had been contributing to a 401k while employed there. I will be filing as a partial year resident in Georgia.
After moving, I took a lump-sum distribution of $2665 from a 401k. Federal income tax was withheld (and I do understand calculating the penalty on form 1040). I received the 1099-R for this distribution today. In box 11, my state is listed as Tennessee. All income that went into this 401k was from my employment in Georgia (5/00 to 8/02).
On my part-year resident schedule, do I include this as Georgia income or do I consider it income earned in Tennessee?
My gut says it’s Georgia income - but I’d love to know if it’s not, as it means the difference between getting about $50 back from Georgia or paying them around $200.
I’d like to pop this back up to see if there’s any help to be found from the daytime folks(I’ve not located a definitive answer yet in online searches).
I’ll let it die after this if there are no answers.
Thanks
IANA CPA, but I’d say it’s Tennessee income, as you received it after moving. I don’t think it matters that it was put into the 401K while you were in Georgia. I think it only matters where you were when you got it back. FWIW, the IRS hotline could probably answer this for free, if you have the patience to deal with them.
My WAG is Tennessee. The form was so marked, you received the money while in Tennessee.
I see the issue like this. You earn income in George to buy stock. You move to Tennessee, then sell the stock at a profit. The profit should be reported on your Tennessee return.
My WAG is that it is Tennessee too. I don’t know anything about Tennessee vs. Georgia taxes but since you were in Tennessee when you received the income it should be reported as Tennessee income.
I have to disagree. A 401K is earned when you have it withheld(not when the cash is received) and it was earned while a resident of Georgia. The tax on the income was deferred until you withdrew it. I had a similar situation where I earned the 401K income while in Indiana and withdrew it immediately after moving to Oregon. Both states agreed it was reportable to Indiana. Any income earned after moving (interest, dividends, etc) would be sited in the new state, but it’s probably so small it would not be worth determining.
Also, the IRS hotline would not help, since this is a state matter. States can get really nasty with this too, but the laws generally state that income is reported when received as a resident or received from a source within the state. You received the income while living in Georgia.
Remember, a state doesn’t have to follow the IRC. Georgia could have just as easily taxed your 401K at the time your received it and not followed deferral rules if their legislature so chose. Thus, you would have paid tax on the amount withheld and any amount earned (company contribution, interest, dividends, etc.).
I used to administer 401(k) plans for a benefits outsourcing company, and we dealt with plan participants in multiple states.
I am not a tax lawyer. I don’t even play one on TV.
However, when we issued 1099-R forms at the and of the year, the tax state listed was the state in which the recipient legally resided at the time of the distribution. Many retirees, who lived their whole lives and earned all their income in Minnesota, would have their legal residence changed to Florida even though they only lived there six months per year - so they could avoid state taxes on their 401(k) payments.
I want to emphasize that I don’t know what the law says about that, but it’s a common approach.
I did some further thinking about this as well - the last time I changed jobs, I also took the payout from the 401k, and that was declared entirely as Georgia income (where that payout occurred), even though it was earned in Tennessee, Mississippi and Georgia. It makes more sense now that this one would be considered Tennessee income (a state with no income tax.)