Are Early Pension Distributions taxable to Michigan?
My niece lost her job in Michigan and cashed out her 401 K in several distributions throughout the year. The distribution code on the 1099-R is "1". I am using Turbotax to complete her return and the Michigan return is asking for the source of this retirement plan. The choices are:
Identify the source of the distribution by entering:
G - if the pension is from a government or public source (including military and railroad retirement)
P - if it is from a private source or an IRA
C - if it is a 2009 Roth conversion
N - if it is an other pension subject to Michigan tax
Which code would I use in this instance?
In addition, does it make financial sense to convert at least a portion of my 401k to an IRA and would the tax treatment differ in any way?
Thanks for your help.
