Over age 70 IRA deduction for CALIF
I have two clients that made deductible IRA contributions for Fed purposes for year 2020 and want to do so for 2021. The contributions are not deductible for CA and were not deducted on the 2020 return. Neither client took a RMD from their IRA in 2020 and both are required to do so in 2021. The software that I am using does not deduct the IRA on the CA return which is correct. But the net amount of the 2021 deduction (in excess of the small pro rated basis) is being added back to IRA income. I don’t believe this is correct and believe there is a programming error in the software. I have spent over two hours on the phone with the software provider who insists this is correct. The net effect would be additional income for CA because of making the nondeductible IRA. I don’t see how this is possible but wanted to make sure I am not overlooking something. Thank you
Permalink Submitted by Alan - IRA critic on Wed, 2022-03-23 20:01
Were QCDs made?
Permalink Submitted by Joy Soulier on Wed, 2022-03-23 23:02
GOOD POINT. NO QCD WERE NOT MADE FROM THE IRA RMD
Permalink Submitted by Alan - IRA critic on Wed, 2022-03-23 23:37
Then perhaps this is the issue – from FTB 1005:
“California law does not conform to the following federal provisions under the SECURE Act: • Repeal of maximum age of 70½ for traditional individual retirement arrangement (IRA) contributions.”
CA and a few other states insist on defying federal conformity benefits. In this case, neither residents or the FTB are likely capable of tracking historical differences in CA and federal IRA tax basis for CA income purposes.