Pennsylvania Tax Question: Cashing Retirement Early (1 Viewer)

[ClownCausedChaos2]

PA Tax Guys, I'm sending out the bat-signal. I cashed in a retirement fund early this year (save the lecture) - This is the stuff that comes in on the 1099-R form. I set aside a portion of the fund for federal and state tax/penalties, but nothing for local, because I didn't think it was taxed as income at the local level. Yada yada yada....Is it taxed at the local level?

 

[mquinnjr]

http://wiki.fool.com/Are_401(k)_Distributions_Taxable_in_Pennsylvania%3F

Early DistributionsIf you make a withdrawal from your 401(k) plan before turning 59 1/2, however, then that money might be subject to Pennsylvania income tax. Pennsylvania taxes early distributions on a "cost recovery basis." That means you don't pay taxes until your total distributions exceed your total contributions. Suppose you've contributed a total of $10,000 to your 401(k), and your account has grown to $30,000. If you were to take money out before age 59 1/2, you wouldn't pay Pennsylvania tax on the first $10,000. That's the money you put in -- it's "your money" -- and it has already been taxed. But everything above $10,000 will be taxed. Under the federal system, by contrast, early distributions are not only fully taxable, they're also subject to a 10 percent penalty, though the penalty can be waived in certain "emergency" or "hardship" situations.

- See more at: http://wiki.fool.com/Are_401(k)_Distributions_Taxable_in_Pennsylvania%3F#sthash.WJU4guwh.dpuf

Also, from the PA Department of Revenue: https://revenue-pa.custhelp.com/app/answers/detail/a_id/1469/~/i-am-getting-an-early-withdrawal-from-my-401k-plan.-how-do-i-determine-the

Looks to me like the net of contributions to earnings is taxed at the PA level at your PA tax rate, out the door.

 

[ClownCausedChaos2]

Thanks, I appreciate it. Still, that seems to reference the state level, not the local tax level. Unless I'm reading it wrong...Which is entirely possible.

 

[Sand]

Local income tax? Crazy.

I guess this is the NE we're talking about, though.

 

[Steve Tasker]

PA local jurisdictions generally only tax the earned wages during the year, I think. Still, though, you need to look it up. This is not official tax advice.

Figure out who your local collector is, go on their website and find the instructions. It may entirely depend on your jurisdiction.

 

[The Big Guy]

Does your PA municipality file local taxes? If not, then no.

 

[Steve Tasker]

Local income tax? Crazy.

I guess this is the NE we're talking about, though.

Pennsylvania and Ohio have local income taxes for pretty much most local jurisdictions in their respective states, AFAIK. Some other states have local taxes as well. NYC and Yonkers have separate local taxes in NY, for example, but the rest of NY does not have local taxes. Lexington and Louisville, KY have local taxes too, I think.

 

[ClownCausedChaos2]

Thanks everyone. After some deeper searching and asking around, it looks like it is taxed locally.