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  • Retirement Distribution Taxation

    Thanks in advance for the help and recommendations. I moved from Massachusetts to KC and did a rollover and then Roth conversion of a pension plan from my former employer. I am trying to clarify something with our tax preparer (tried doing it myself but the state preparation was too complicated).
    Since I am a non-resident in MO but work there, I don't think that MO should be able to tax this retirement distribution (which was converted to a ROTH), however they are listing it in my income. Does anyone know if a state can tax me on money I did not earn in that state if I am NOT a resident of that state?

    Thanks for the help

  • #2
    I believe conversion to a Roth results in 2 firms of tax- 1. Pre tax contributions are taxed, and 2. Gains beyond contributions are taxed. I believe that this counts as income towards your current situation so if you converted while living in MO, then you’re paying MO.

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    • #3
      The conceptual error here is that you are not being taxed based on the original source of earnings. The income accrued to you (because of the conversion) while you were a MO resident. Yes, you owe the state tax.

      ok, caveat, I am not a tax professional. But this one seems pretty clear.

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      • #4
        I am not a Missouri resident. I have never been. The money was earned in Massachusetts.

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        • #5
          We earned the money in Massachusetts but converted it when we became Kansas residents. We work almost exclusively on the Missouri side of Kansas City.

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          • #6
            you need to look up missouri state law. Also, I'm pretty sure unfortunately for you Kansas City is one of those cities that taxes income tax. I think it's 1%. You need to look into that and also make sure you don't also owe Kansas City money

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            • #7
              Given you are NOT a resident of MO, I don’t understand how you could owe tax on the conversion. Saying this w/o researching the specifics, but this is not logical. And, as I’ve said before, most tax law is (contrary to popular opinion) logical and I’ll even go so far as to say that it’s fair. If you are using a CPA who is located in KS but familiar w/cross-border issues between the 2 states (as most in Kansas City would be), then I would ask for the specific cite. It c/b that the tax s/w is just pulling it in and they are not looking deeper. Or they c/b right, but want to know more at this point.
              Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                Thank you all for your help.

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                • #9
                  I just wanted to follow up since the situation (live in KS but work in MO) is a bit different than I originally thought. I think it isn’t going to matter in that you will only have to pay the tax in one of the two states since they have a reciprocal agreement. Just file the state taxes, one as a resident one as a nonresident, and KS will credit any taxes paid in MO. Here are two quick links. Now, I think they are really getting at earned income, but the way it works in the agreement between the states is 1)report the income; 2) get a credit for redundancies.

                  https://ttlc.intuit.com/community/st...e-tax/00/85351
                  https://dimovtax.com/live-kansas-work-missouri/

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