401k to IRA to Roth IRA conversion & move from Tennessee to Minnes

[Guest Scott Bemis]

My contact information is listed at the end of this message.

My question is with Minnesota state income taxes for 1998, 1999, 2000, and 2001 with a 401k to IRA to Roth IRA conversion. I am using the 4 year averaging federal income tax made for ROTH IRA conversions made before December 31, 1998. My conversions were completed before December 31, 1998.

First, I switched employers in July 1998 (one large corporation to another large corporation). At the same time, I switched residency from Tennessee to Minnesota, too, again in July 1998 (change jobs, new job in Minnesota, move to Minnesota for new job, etc).

Due to my switch of employers, I was allowed and I did roll my 401K plan to IRA and then to a ROTH IRA from my former employer. I did this in October 1998, after I established residency in Minnesota. To further complicate this, in May 1998, while I resident AND employed in Tennessee, I was allowed and did roll $20,000 from the 401k plan to a IRA and eventually to a Roth IRA (in May 1998). This early withdrawal was allowed in the 401K plan.

All the income contributed to this 401K plan was earned while I was a resident in Tennessee (1985 to July 1998). These were pretax contributions made to the 401K plan while.

The first $20,000 was converted to the ROTH IRA (via an IRA) was I was in Tennessee (May 1998). The final larger amount, $100,000 (not the real amount) was converted to the ROTH IRA after I established residency in Minnesota (October 1998).

How do I declare this on my Minnesota state income tax form? As a side note, I have already completed my 1998 Federal income tax forms and all asssociated forms. There is no confusion with how I declare this on my Federal income tax for the next 4 years.

1. I cannot find the correct forms or regulations for Minnesota for this. From my view, at least the $20,000 should not be included in Minnesota state income tax. I was not a resident in Minnesota when this was done. This income was also earned in Tennessee.

2. I am also trying to determine if the final $100,000 may also be excluded from Minnesota state income tax for the next four years. Why? I earned this income while a Tennessee resident. This pretax deduction reduced my Tennesseee taxes (pretax deduction in Tennessee). Tennessee state income tax only covers interest and dividends, not income from a job.

If so, what forms do I use for Minnesota. I have already searched Minnesota web site for forms and regulations.

On line 1 on the Minnesota state income tax, I enter line 39 from the 1040. This includes the amounts in 1. and 2. above. I cannot find how I can deduct this further down the Minnesota state income tax form on line 5 Subtractions. (I should be able at least 1. above -this occurred in Tennessee. Or how can Minnesota tax me while I was a resident of Tennessee on income earned in Tennessee?)

Here are even more details.

First, I have resided and only earned income in Tennessee from December 1985 to July 14, 1998, working at a job (paid Federal income taxes though on this income, withheld from my paycheck; it was a job at large corporations, normal W-2s, W-4s, etc.).

I moved to Minnesota and started earning income on July 27, 1998 (again a job at a large corporation in Minnesota, withholding for Federal and Minnesota state income tax, W-2s, W-4s,etc).

I established residency in Minnesota through a purchase of a home in Minnesota on August 15, 1998. I also sold my home in Tennessee on August 8, 1998 (sold just before I purchased my home in Minnesota). I also switched my driver's license to Minnesota, purchased and registered an automobile in Minnesota in August 1998.

While working in Tennessee from 1985 to July 1998, I participated in the large corporations 401k plan during this time - all pretax deductions for "Tennessee income", excluded from Tennessee state income tax.

Scott Bemis

Work Internet email: sebemis@bemis.com

Home Internet email: sebemis@access.webcombo.com

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Scott Bemis

Internet:

sebemis@access.webcombo.

net

[Guest J Samuelson]

I would recommend calling the Minnesota Department of Revenue at 800-652-9094 and talking with someone there on the tax consequences of the $20,000 you think should not be taxable to MN. I am assuming you are completing the M-1NR for nonresidents and part-year residents. That is the form to allocate your MN income to MN.