The rollover to a traditional IRA would have no tax consequence, rolling into the same pre-tax fund type. Only withdrawals will trigger a tax. You will receive a 1099-R tax form and it will have a code G for the distribution. This lets the IRS know that it was rolled over. What state do you live in that wanted taxes? Some states tax 401k through the year, most don't. You will have income equal to the state taxes, if you did not make up the difference.
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