Hawaii tax returns -taxability of retirement pension when Federal COVID rules apply
Hawaii says:
"You Must Fix This Error Hawaii Individual
Retirement Exclusion Worksheet line 6, total exclusion.
We're still working on updates related to Retirement Distributions that qualify for disaster or COVID relief. You can keep working on your tax return and we'll remove this message when its ready."
This is very misleading. A:t tax.hawaii.gov, Tax Law and Guidance, Digest of Tax Matters 2020, they are very clear that the Federal COVID provisions do not apply (Look at pages 13, 14 and 15). If I can figure out how to attach this statement I will attach it to this E mail.
I have sent a letter to Senator Morikawa asking to make a law allowing Hawaii to follow the Federal COVID rules. Also, since Hawaii law is that when ever there is a Code 1 the retirement is 100% taxable I have asked him to change the law so it is not taxable.
The thing for Hawaii tax preparers is to be aware that as I see it, under current Hawaii law 100% of this distribution is taxable.
To get the federal tax return to follow the COVID rules of only 1/3 taxable and no penalty, Scroll down in Form 1099 R worksheet and you will find a place to make this happen.
Subject: RE: Taxation retirement plans. Can Hawaii state legislators make a law that provides 2020 retirement plan to be not taxable to Hawaii or only 1/3 taxable each year over 3 years.
Presently “ the following provision is not operative for Hawaii income tax purposes.
72(t); non-code
Waiver of 10% Early distribution penalty
A 10% penalty applies to any early distribution from a qualified retirement plan.
The Act waives the 10% early distribution penalty for distribution related to the
Coronavirus of up to $100,000. The Act allows any taxable distributions to be
Taxed ratably over the following 3 years. Related to coronavirus includes
Those diagnosed, whose spouse or dependent was diagnosed, and those who
Experienced financial hardship from quarantine, furlough, layoff, or other indirect
Effect of corona virus.
Effective for distributions made from Jan 1, 2020 through December 31, 2020.”
Hawaii residents can not take advantage of the 1/3 being taxable. Also because there
Is a code 1 on the Form 1099 R 100% of the distribution is taxable.
Can Hawaii make a law to follow the Federal rules and allow only 1/3 taxable each
Year for 3 years.
Better yet, because the code 1 10% penalty is waived for the federal tax return,
can Hawaii law change, proceed as if there is no code 1, and make the distribution 100% not taxable.
Presently with retirement income when there is a code 1, the retirement plan is taxable to Hawaii.
If there were no code 1 the qualified retirement plan would not be taxable to Hawaii.
To get the above information I went to:
Tax.hawaii.gov
Tax Law and Guidance
Digest of Tax Matters
2020
From Peter Goodbody
Phone 591-0445
Sharon Y Morikawa is the Senator from S District 12
Waikiki, Crestview. Manoa, Pearl City and Pacific Palisades
