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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 6181
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I am 71 years old and retired 10 years ago from a savings

Customer Question

i am 71 years old and retired 10 years ago from a savings bank in 2006. i was provided a " non-qualifing retirement plan funded by an annuity for a period "certain of 15 years from date of retirement", or for the remainder of my life. When I first retired in 2006, I received a 1099R. After that, I have been receiving W-2 forms. I intend to move to Nevada next year and have been told that I may still have to pay Massachusetts income taxes even after I become a resident of another state because of the non-qualifing nature of my retirement plan that was earned while a resident of Massachusetts. Can you advise as to whether the state can still legally require me to continue to pay state income taxes on the pension income even though I will no longer be a resident of Massachusetts?
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.

I'm not sure what you mean by "legally require" you to pay state income taxes?

MA position is that your non-qualified "pension" is "effectively connected" with your employment in MA and therefore is taxable in MA:

Massachusetts Source Income, Massachusetts gross income derived from or effectively connected with (1) any trade or business, including any employment, carried on by a non-resident in Massachusetts, whether or not the non-resident is actively engaged in a trade or business or employment in Massachusetts in the year in which the income is received;

It's interesting that you were first given a 1099 and now the reporting is on a W-2, which is the same reporting that was used when you were actually working in MA.

As far as "legally require" goes it is simply the law and as with most things one either complies with the law or not. MA will receive their copy of the W-2 and if there is no corresponding reporting of that income, they will begin the process of assessing & collecting the related income tax. As long as you don't have any assets in MA it will be difficult for them to collect the tax, but eventually they would garnish your "pension" payments and file a general lien against any assets you do have in MA and that will show up on your Credit Report.

Of course there would then be penalties & interest involved and the tax assessment would be based upon the gross amount of income you receive without any deductions or exemptions that you may be entitled to. In other words a mess to straighten out.

Customer: replied 1 year ago.
Thank you for your response to my question. The first year that I retired, I did receive a 1099 and was told that I would I would pay approximately $13,000.00 to medicare because I retired at 62 yrs of age. I paid the medicare the amount required and the next received a W-2 and have been paying Massachusetts income taxes since retirement and will continue as the law requires. I would be less than truthful if I told you that I am pleased with the answer but I did think that was going to be the answer...unfortunately. I will just take the state tax paid as a reduction of my Federal Income Tax and reduce the the federal tax by $1200. and net cost of $4800....make the situation more palatable. Thank you, ***** ***** Cowden
Expert:  Stephen G. replied 1 year ago.

When you say you paid $13,000. to Medicare, I presume that you meant to say "Social Security" because until you reached your full retirement age your "earnings" would have been limited & if you exceeded that limitation your Social Security benefits would have been reduced or even eliminated with the reduction increasing your benefit at your full retirement age. At age 62 there would have been no reason to pay anything to Medicare.

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