PA preparers need help with tax on IRA distributions

[Max W]

I know that PA does not allow deferred contributions for retirement plans.  However, from what I understand the earnings on an IRA are taxed.

 

Does this  apply to both Code 1 & 7 distributions.

 

What about distributions from a 401K?

 

TIA

[jklcpa]

re: IRA - https://revenue-pa.custhelp.com/app/answers/detail/a_id/365/~/how-do-i-determine-if-my-ira-withdrawals-are-subject-to-pa-income-tax%3F

 

re: 401K - https://revenue-pa.custhelp.com/app/answers/detail/a_id/273/~/are-my-contributions-to-a-401%28k%29-plan-excluded-from-employer-withholding%3F

 

re: 401K early withdrawal - https://revenue-pa.custhelp.com/app/answers/detail/a_id/1469

 

Page 11 of the PA instructions contain the same info about the IRA, and also a reference to Tax Bulletin 2008-01 that comes up as an 8-page pdf from PA's website. 

[easytax]

Earnings are taxed at distribution. Here is an excerpt from the "PA Personal Income Tax Guide (pages 100 - 101) see:  www.revenue.state.pa.us shortcut:  http://www.revenue.state.pa.us/portal/server.pt/document/628138/pitguide_chapter_07_pdf

 

    NOTE:  Basically it all goes back to -- taxable is what was not taxed before or not contributed as exempt (employers contributions in some cases) and you figure that out under "cost recovery method".

 

F. Distributions To Plan Participants Under Employer-Sponsored IRAs

All amounts distributed under an employer-sponsored IRA shall be included in compensation to the extent provided in Section H, "Cost Recovery Method," except--

• Distributions to a former employee made on or after the later of—

o The date the former employee attained age 59½, and

o The date on which the former employee separated from the service of such employer sponsor, and

• For the year of the transfer, distributions that are transferred into an individual

retirement plan or qualified plan where the transferred amounts are not included

in income for Federal income tax purposes.

G. Distributions To Plan Participants Under Individual Retirement Investment Accounts

All amounts distributed from an individual retirement investment account shall be included in compensation to the extent provided in Section H, "Cost Recovery Method," except--

• Distributions made to a participant after the participant attains age 59½, and

• For the year of the transfer, distributions that are transferred into an individual retirement plan or qualified plan where the transferred amounts are not included in income for Federal income tax purposes.

H. Cost Recovery Method

The extent to which a distribution is taxable as compensation shall be determined using the cost recovery method of accounting. That accounting method is explained in Personal Income Tax Bulletin 2005-5 ("Qualified Employer Plans").