Should I be paying state tax on my federal thrift savings plan distribution. If so how would I go about it?

Forum|Forum|6 years ago
June 6, 2019
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Irene2805

Did you get a 1099-R or a 1099-MISC for the distribution? What state are you in and were state taxes withheld?

vze2nn4r

d-coulombeAuthor

yes. I received two. One for the "mistake" made when transferring funds for a disbursement and one for the normal monthly disbursements. I paid Federal tax on the "mistake" but not on monthly payments. No Massachusetts State tax was paid on either.

paulgoodrich32

You are subject to fines and penalties for not paying Massachusetts tax on payments or withdrawals from a Federal Thrift Savings Plan (TSP)

Go to: https://www.mass.gov/service-details/view-government-pensions#Thrift

Federal employee Thrift Savings Plan (TSP)

The Thrift Savings Plan (TSP) provides federal employees with the same savings and tax benefits that many private employers offer. This plan is similar to private sector 401(k) plans. You can defer tax on part of your wages by contributing it to your accounts in the plan.

As an employee:

Contributions made by an employer to a thrift savings plan are excluded from your gross income in the year contributed. See the "Current year exclusion amounts" table below for elective deferrals, including "catch-up" provisions.
Income earned on the contributions while in the thrift savings plan account is excluded from gross income.
Distributions made to the retiree from the plan are fully taxable in the year paid.

See Mass. Gov Website https://www.mass.gov/service-details/view-tax-treatment-of-retirement-plan-contributions-and-distributions

Retirement plan Contribution to plan MA vs. federal wages when contributing Income from retirement plan

Federal employee thrift savings plan	Deferred/not taxable		Taxable

Irene2805

No - You do not have to pay MA state tax on your thrift plan distributions.

According to the instructions for MA Form 1:

Massachusetts gross income does not include: Pension income received from a contributory annuity, pension, endowment or retirement fund of the U.S. government or the Commonwealth of Massachuseys and its political subdivisions.