Instructions For Form 2m - Individual Income Tax Forms And Instructions (Includes Form 2ec) - 2011 Page 8
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35Page 4
Instructions for fi ling Montana Form 2M
tax refund is taxable in 2011, unless one of the following
medical care savings account as an addition to federal
scenarios applies to you:
adjusted gross income on this line.
● If you claimed the Montana standard deduction when
Please note that you may also be charged a penalty for
you fi led your 2010 Montana return (instead of itemized
making any nonqualifi ed withdrawal. See the instructions
deductions) in 2011, none of your federal income tax
for Form 2M, line 59, page 8 and on Montana Form MSA
refund is taxable and you do not need to complete
for more information on the Montana medical care savings
Worksheet II.
account 10% penalty.
● Your deduction for federal taxes paid in 2010 may
Subtractions – Lines 27 through 35
have been limited on your Montana tax return to
$5,000 ($10,000 if fi ling a joint return). Because of this
Line 27 – Exempt Interest and Dividends from
limitation, your refund may or may not be taxable. A
Federal Bonds, Notes and Obligations
simple way to check this is to subtract the refund that
If you received interest on United States government
you received in 2011 from the total federal income
obligations and mutual fund dividends attributable to that
taxes paid in 2010 (Form 2, Schedule III, lines 7a
interest, you can subtract these amounts from your federal
through 7d or Form 2M, Schedule I, lines 7a through
adjusted gross income as long as they are included in your
7d).
federal adjusted gross income on Form 2M. In addition, if
○ If the result is more than $5,000 ($10,000 if you fi led
you received interest on obligations from U.S. territory or
a joint return), none of the refund is taxable and you
government agency obligations that are specifi cally exempt
do not need to complete Worksheet II.
by federal law or any mutual fund dividends attributable
○ If the result is less than $5,000 ($10,000 if you fi led
to this interest, you can subtract these amounts from your
a joint return), please complete Worksheet II to
federal adjusted gross income as long as they are included
determine whether your federal income tax refund is
in your federal adjusted gross income on Form 2M.
taxable.
Interest on obligations that are only guaranteed by the
Advance earned income tax credit payments were not part
United States government is not tax exempt. If you
of the refund you received in 2011. Therefore, you should
received interest or mutual fund dividends attributable to
subtract the amount reported in Box 9 of your federal 2010
Government National Mortgage Association (Ginnie Mae)
Form W-2 from the refundable credits you calculated for
bonds, Federal National Mortgage Association (Fannie
Worksheet II, line 3, and enter the result on Worksheet II,
Mae) bonds or Federal Home Loan Mortgage Corporation
line 3.
(FHLMAC) securities, you cannot subtract this interest or
mutual fund dividends.
Line 24 – Addition to Federal Taxable Social
United States obligations that are exempt include:
Security
● Series E, EE, F, G and H savings bonds
Your social security benefi ts taxable to Montana may be
● U.S. treasury bills
different from the amount of taxable benefi ts that you
reported on Form 2M, line 13b. You should determine your
● U.S. government notes
Montana taxable social security benefi ts by completing
● U.S. government certifi cates
Worksheet VIII, Taxable Social Security Benefi ts, found
Please refer to your federal Form 1099-DIV to determine
on page 26 of this booklet. Before you can complete your
what percentage of your dividends qualifi es for this
social security worksheet, you will need to complete your
exemption.
partial pension and annuity income exemption worksheet,
Worksheet IV, found on page 24 of this booklet.
Line 28 – Exempt Unemployment Compensation
If, after you have completed your social security worksheet,
If you have received unemployment benefi ts from Montana
you fi nd that your social security benefi ts taxable to
or from another state, these benefi ts are exempt from
Montana are greater than those that you reported on
Montana tax. If you reported taxable unemployment
Form 2M, line 13b, enter that difference on this line. If your
benefi ts on Form 2M, line 12, enter the same amount of
social security benefi ts taxable to Montana are less than
these benefi ts on this line.
those that you reported on line 13b, you should report that
difference as a subtraction from federal adjusted gross
Line 29 – Partial Pension and Annuity Income
income on line 33.
Exemption
If you reported taxable retirement income on your Form 2M,
Line 25 – Medical Care Savings Account
lines 10b and/or 11b, you may be entitled to a partial
Nonqualifi ed Withdrawals
exemption of this income. Before you determine if any
Your nonqualifi ed withdrawal from a Montana medical
of this retirement income is excluded, you should fi rst
care savings account is a withdrawal that you made during
determine if any of this income is from Tier II Railroad
the tax year for any purpose other than to pay for eligible
Retirement benefi ts. If so, your Tier II benefi ts are 100%
medical expenses or long-term care. You can refer to
exempt from Montana taxation. You should exclude your
Montana Form MSA for detailed instructions. You should
entire taxable Tier II Railroad Retirement benefi ts on this
report any nonqualifi ed withdrawals from your Montana
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