On Form 8880 we must reduce eligible contributions by distributions received from certain retirement plans. Does that include state plans that were mandatory contributions at the time? My client has just retired and is receiving monthly payments from the state plan. His wife is working and contributing to a Simple plan. Pub 590 lists certain distributions that will and will not reduce the contribution credit. But I can't find anything about the non-voluntary plans, and I am wondering that since they don't qualify for the credit at the time of contribution, must they reduce the credit now?
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Non-Qualified Plan
I've always thought the TCRS (Tennessee Consolidated Retirement System) was an UNqualified plan. If this were a commercial enterprise instead of a government, they could never get away with having an unqualified plan, but since they are a government, there's not much the IRS will do to them.
Non-qualified plans are not mentioned in the inclusions or exceptions to line 4. If you have the resources to see if there is a court decision or general consul decision, do so. Otherwise I would not enter anything on line 4. Probably not a court case because this credit is relatively new and also never large enough to justify going to court.
Be careful of a spousal distribution. The total of both spouses have to be listed in both columns. The math doesn't make sense, but this is what IRS wants. -
Thanks
I am always having to go back and read all the exclusions for this form. The instructions are not very clear. Imagine that!Comment
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