State Tax Question Concerning 401k to Roth IRA Rollover

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Topic Author
Cruz
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State Tax Question Concerning 401k to Roth IRA Rollover

Post by Cruz » Wed Apr 17, 2019 9:30 am

My question requires a bit of a backstory so here goes. I worked in Alaska (lived there as a resident) and had a 401k through work. I moved to Virginia for grad school in 2016 but kept my Alaska residency (license, voting...etc) as I was not going to stay in Virginia beyond school. In 2017 I started the process of rolling over my 401k to my Roth IRA because I knew I was not going to work for this company again and my income tax rate was low during school. I rolled over part of it in 2017 and filed a Virginia non-resident tax return. In early 2018 I rolled over the remainder of my 401k and started a year long fellowship where I was working in Maryland but living in Washington DC but was being paid from a school in Virginia (I paid federal estimated quarterly taxes on my stipend). My Alaska state drivers license expired August 2018 and since I was currently living in DC and unsure where I would live next post-fellowship I got a DC drivers license.

For my 2018 taxes I filed a DC state tax return and paid state taxes on my fellowship stipend as well as my rollover. I ended up paying way more than I expected.
- Should I have paid DC state taxes on my rollover when I did not make the money in DC? I completed the rollover in January of 2018 when I was still living in Virginia if that matters.
- Was I correct in paying DC state taxes at all this year when my fellowship stipend was coming from Virginia?
Last edited by Cruz on Wed Apr 17, 2019 11:11 am, edited 1 time in total.

Katietsu
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Re: State Tax Question Concerning 401k to Roth IRA Rollover

Post by Katietsu » Wed Apr 17, 2019 9:35 am

The rollover will be taxed by the state of residency at the time you rolled it over.

Topic Author
Cruz
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Re: State Tax Question Concerning 401k to Roth IRA Rollover

Post by Cruz » Wed Apr 17, 2019 10:11 am

I rolled it over in January 2018 when I was still in school in Virginia (prior to moving to DC for the fellowship) but still considered an Alaska resident, so should I have paid AK state tax (there is no income tax there)?

Topic Author
Cruz
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Re: State Tax Question Concerning 401k to Roth IRA Rollover

Post by Cruz » Fri Apr 19, 2019 7:32 am

Katietsu wrote:
Wed Apr 17, 2019 9:35 am
The rollover will be taxed by the state of residency at the time you rolled it over.
Is it the actual day/month you do the rollover or where your residency was when you file taxes?

Katietsu
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Re: State Tax Question Concerning 401k to Roth IRA Rollover

Post by Katietsu » Fri Apr 19, 2019 11:36 am

Not sure I understand the question. A rollover is taxable income to the state in which you were domiciled at the time you did the rollover. If you did the rollover in February, then what was your state of residency in February?

I am also not sure you have determined your correct state tax status over the last few years. You might want to read the rules for each locale.

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grabiner
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Re: State Tax Question Concerning 401k to Roth IRA Rollover

Post by grabiner » Fri Apr 19, 2019 11:48 am

Cruz wrote:
Fri Apr 19, 2019 7:32 am
Katietsu wrote:
Wed Apr 17, 2019 9:35 am
The rollover will be taxed by the state of residency at the time you rolled it over.
Is it the actual day/month you do the rollover or where your residency was when you file taxes?
It's the date of the rollover. Part-year resident tax forms always ask you to separate income earned while a resident of the state from income earned while a non-resident of the state. The tax on the rollover was earned on the day the money was withdrawn.
Wiki David Grabiner

Topic Author
Cruz
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Re: State Tax Question Concerning 401k to Roth IRA Rollover

Post by Cruz » Fri Apr 19, 2019 10:51 pm

Katietsu wrote:
Fri Apr 19, 2019 11:36 am
Not sure I understand the question. A rollover is taxable income to the state in which you were domiciled at the time you did the rollover. If you did the rollover in February, then what was your state of residency in February?

I am also not sure you have determined your correct state tax status over the last few years. You might want to read the rules for each locale.
Grabiner answered my question below, thank you for responding though.

How do you figure that I have not determined the correct state tax status? I have read the rules for each state I have lived in, but there may be something I missed.

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Cruz
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Re: State Tax Question Concerning 401k to Roth IRA Rollover

Post by Cruz » Fri Apr 19, 2019 10:52 pm

grabiner wrote:
Fri Apr 19, 2019 11:48 am
Cruz wrote:
Fri Apr 19, 2019 7:32 am
Katietsu wrote:
Wed Apr 17, 2019 9:35 am
The rollover will be taxed by the state of residency at the time you rolled it over.
Is it the actual day/month you do the rollover or where your residency was when you file taxes?
It's the date of the rollover. Part-year resident tax forms always ask you to separate income earned while a resident of the state from income earned while a non-resident of the state. The tax on the rollover was earned on the day the money was withdrawn.
Thanks for responding, I think this means I need to amend my taxes because I was not living in DC at the time I completed the rollover.

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