1099 Reporting Wrong State

[LakeRat1]

Need Advise-----> New to retirement and did not inform the financial institutes we deal with of our move timely.

Problem - I have three 1099s That show our resident state as Missouri, we actually had moved to Florida and rented a home in November 2014, through March. During that time we had worked with a realtor to purchase our own place. We purchased our home and closed on our home in July, then went back to Fl in July for a couple of weeks, again in September for a week, then back down October and we will stay through April.......

We are Florida residents, DL, Cars tagged, boat registered, and have our home...... We did keep our condo in Missouri as we plan on going there during the summer months.

I failed to notify Principle, Mass Mutual, and Fidelity of our move...... I received the 1099s, and they show MO as our state of residence ...... During the past year, I had stopped paying into MO State tax back in March, as we had made FL our primary home, Missouri our secondary.......

I have spoken to all three and they are telling me that will not issue new 1099s as I failed to inform them until now ......

Any thoughts on what I can or should do, or will I have to pay the 6% State Income Tax on our Annuities and IRA distributions?

All advise is very much welcome ......

[MichaelB]

Not a tax expert.

Document your dates carefully and do nothing. If there is withholding, file as a non-resident to have it returned. Otherwise, the address info on the 1099's is not an obligation to pay tax. If the state feels you have a tax obligation you will be notified and have an opportunity to make your case then.

[LakeRat1]

On the 1099s that state box has MO listed ...... The gal that does my taxes, said she had that since I had paid in "Some" and that all the 1099s are show MO, that I need new 1099s or I will have to pay additional tax

[MichaelB]

Quote:

Originally Posted by LakeRat1 On the 1099s that state box has MO listed ...... The gal that does my taxes, said she had that since I had paid in "Some" and that all the 1099s are show MO, that I need new 1099s or I will have to pay additional tax

That doesn't make sense. Yes, the payers should give you new 1099's, but they won't, so you file based on the actual, correct residency and prepare to be audited. You should not have to pay tax because of an address error.

[pb4uski]

While exactly when you became FL residents rather than MO is unclear, from what you described it sounds like you at least part-year residents of MO. What I would do is select some date after you closed on your FL home as the date of the change after looking at when you changed DL, car registrations, voting, etc. and do a part-year return based on on that date.

I'm not sure how it works in MO but I just did a part year return for DS and what you do is compute the MO tax as if you were a resident all year and then go through each line of income and allocate it to the period that you were a resident. So for example, if you had no capital gains during the period you were in MO and did some trades while you were a FL resident then those gains would not be included in your MO income. Then a factor is computed being the total MO income divided by the total income and that ratio is applied to the tax to get your part-year resident tax. YMMV as other states may have different procedures.

In any event, if you make a good faith effort then you'll be in a good position as long as you understand that there is always the risk that MO may challenge what you did but they should understand that all those things can't be changed at once... if not then a tax court judge probably would.

Not getting new 1099's create some tax risk but I would go by what happened rather than what was reported to MO and be prepared to defend what you did.

[harley]

I'd just file it all as if it's FL, then see if MO says anything. If not, good to go. If the tax filer won't play, have them do the taxes as if for MO, but don't mail that one. If you need to report it in FL, buy a copy of TurboTax (or something), copy the answers from the MO one, and mail that one in. Sounds like much ado about little. Unless you're talking big bucks, I doubt anything will ever come of it.

[Hermit]

I would get an accountant to do the taxes this time. Let the accountant answer the questions. My accountant filed VA and CO taxes when I moved and split the year by month. I think it was 2/12 and 10/12. The taxes were figured for the whole year for both states and then I paid the portion to each. I told the accountant I officially moved in the month I replaced my DL.

[pb4uski]

Quote:

Originally Posted by LakeRat1 On the 1099s that state box has MO listed ...... The gal that does my taxes, said she had that since I had paid in "Some" and that all the 1099s are show MO, that I need new 1099s or I will have to pay additional tax

Quote:

Originally Posted by MichaelB That doesn't make sense. Yes, the payers should give you new 1099's, but they won't, so you file based on the actual, correct residency and prepare to be audited. You should not have to pay tax because of an address error.

Totally agree. If she won't do it find another preparer.

[LakeRat1]

We were in Florida, Dec 14, Jan 15, Feb 15, Mar 15 (renting while we looked for a place to purchase) Back to Missouri Apri 15, May 15, June 15. We purchased/closed July 15, made 4 different trips between July and October, then back to FL full time again, October and will stay in FL until late April.

I had made Florida my primary state back in December 14 when we first rented...... While still keeping our condo in Missouri as our summer residence 2nd home.....

We have no capital gains, as we are living off of a 401k/IRA Rollover..... But as you know, this is all reportable income.......We paid cash for the Florida home and along with our draw, our income was 160ish. I would rather not pay any state income to Missouri as the rate is 6%

Again, we are new to retirement and seem to be making some costly mistakes.......

[pb4uski]

Quote:

Originally Posted by LakeRat1 .....I had made Florida my primary state back in December 14 when we first rented...... While still keeping our condo in Missouri as our summer residence 2nd home..... .....I would rather not pay any state income to Missouri as the rate is 6% Again, we are new to retirement and seem to be making some costly mistakes.......

You can't just wish your way to a change in tax residence after the fact because you don't like the tax implications of what you did. Your change in residence must be supported by that facts and circumstances relevant to your situation.

The approach you are taking, that you changed residence in 2014 when you first rented in FL may cause you trouble with MO unless you started changing the things of your life to the FL rental address soon after you arrived in FL. The criteria MO will likely look at as to when you became a FL resident and no longer a MO resident was when did you register to vote in FL, when did you surrender your MO drivers license and get a FL drivers license, when did you change your MO condo property taxes from homestead to non-resident (if applicable and if you did change it), when did you establish FL as your homestead, when did you establish FL bank accounts and direct any income to those accounts, etc.

Also, what did you list as your address when you filed your 2014 MO state tax return in 2015 and did you file as a part-time resident since you claim that you changed your residence in 2014? When did you change address to FL for credit cards, etc.

Also see page 4 of this document. https://www.williamblair.com/~/media...353CB178B1.pdf

I'm guessing that most of these things took place in 2015 after you bought your home and made the big 401k distribution to close on the home.... if so then MO has a valid claim to that being MO income. However, if you had jumped on these things in 2014 (or even done some in 2014 and the rest in early 2015) then your position that you changed residence in 2014 might have some merit. In fact, if you did them before you made the big distribution to pay for your home then you would have a case to exclude that and subsequent withdrawals from being MO income.

You can always file as you want knowing that there is a risk that MO may challenge you and if they do the just pay up... not much to lose other than perhaps some penalties and interest.... I doubt that they would throw you in jail for it.

Alternatively, you could file a part year return and allocate the IRA income 50/50 rather than when the withdrawals were made and that might well past under their radar and cut your tax bill significantly with much lower risk. For example, if the 160 is 100 for the FL house and 60 for living expenses, a strict interpretation would be that 130 is MO and 30 is FL assuming the change in residence was after the closing on the FL house, but 50/50 would result in MO income of 80 and reduce your tax bill by 40%.

YMMV.

[LakeRat1]

Quote:

Originally Posted by pb4uski You can't just wish your way to a change in tax residence after the fact because you don't like the tax implications of what you did. Your change in residence must be supported by that facts and circumstances relevant to your situation. The approach you are taking, that you changed residence in 2014 when you first rented in FL may cause you trouble with MO unless you started changing the things of your life to the FL rental address soon after you arrived in FL. The criteria MO will likely look at as to when you became a FL resident and no longer a MO resident was when did you register to vote in FL, when did you surrender your MO drivers license and get a FL drivers license, when did you change your MO condo property taxes from homestead to non-resident (if applicable and if you did change it), when did you establish FL as your homestead, when did you establish FL bank accounts and direct any income to those accounts, etc. Also, what did you list as your address when you filed your 2014 MO state tax return in 2015 and did you file as a part-time resident since you claim that you changed your residence in 2014? When did you change address to FL for credit cards, etc. Also see page 4 of this document. https://www.williamblair.com/~/media...353CB178B1.pdf I'm guessing that most of these things took place in 2015 after you bought your home and made the big 401k distribution to close on the home.... if so then MO has a valid claim to that being MO income. However, if you had jumped on these things in 2014 (or even done some in 2014 and the rest in early 2015) then your position that you changed residence in 2014 might have some merit. In fact, if you did them before you made the big distribution to pay for your home then you would have a case to exclude that and subsequent withdrawals from being MO income. You can always file as you want knowing that there is a risk that MO may challenge you and if they do the just pay up... not much to lose other than perhaps some penalties and interest.... I doubt that they would throw you in jail for it. Alternatively, you could file a part year return and allocate the IRA income 50/50 rather than when the withdrawals were made and that might well past under their radar and cut your tax bill in half with much lower risk. YMMV.

Our entire intent was to escape MO Taxes, while enjoying endless summers ...... We changed our DL, titled the autos, and registered all in August after we closed on the FL Property ...... Funds to purchase the home were withdrawn in July as we closed the 30th

We did not do this before August, as we did not have a permanent address. We had decided and planned that we would be FL residents 7 to 9 months a year back in Nov/Dec 2014. Made the decision to move, rent, then purchase ........

I do appreciate the feedback from each of you

Thanks

[pb4uski]

I understand your intent and why you did what you did (I probably would have done the same).

If you want to be really aggressive tax-wise you could claim 25% is MO and 75% is FL based on the fact that you stopped making MO estimated tax payments back in March but if you get challenged you have a weak case since most of the other activities associated with a change in residence occurred in August.

A more moderate tax position would be to go 50/50 since you spent about 1/2 time in each venue, purchased your FL home about mid-year, etc. This might save you some though I think the technically correct answer is to look to the timing of your IRA withdrawals and those before August were MO income and those in August or later were FL income.

Even the technically correct answer might be challenged by MO since the payers are reporting the distributions as 100% MO income but with your facts and circumstances that should be easy to overcome.

Sorry for the bad news. And.... what the heck are you doing up at this time of night?

[LakeRat1]

Uggg.... I hate paying taxes .... I am stressing over this tax problem, can't sleep

[pb4uski]

You need to think of it differently... you deferred that income when you were working and avoided that income being taxed at 6% and simply are paying the tax now when you withdraw the money.

So you avoided paying 6% while you were working but will pay 6% on those withdrawals so you're even.... but the cherry on top is that since you are now a Florida resident all your future withdrawals will be 0% state income tax.

[LakeRat1]

Good Point !!! With that said, I am going to relax and try taking a nap .... Going to be a nice day today, gots to get to the pool or beach by 11 to get a "good" spot ...

Thank You

[MichaelB]

States are pretty vague on how they define residency, but intent is a primary consideration. If you intend to be a Florida resident, rent start date should work, especially if you changed driver's license and insurance. Owning property gives MO reason to believe you still may be a resident and owe tax, key for that is if you actually earned any income while physically present in the state. If not, the 2014 date for new residency should hold. If you have taken retirement account withdrawals while in MO, that might complicate things a bit.

[gauss]

Many state income tax forms for partial or non-resident will pro-rate your taxable income for that state by the amount of time you spent in the state. This will vary on a state by state basis. This is the legal part that governs what you owe. What is printed on the 1099-R is only for reporting purposes. You may owe the tax to another state even if it is not shown on the 1099-R.

If you are trying to prepare a proper tax return(s) investigate how income is taxed and allocated in all of the states in play here.

-gauss