On the Pennsylvania return, you need to manually indicate which retirement distributions are not taxable (because some are taxable).
In the Pennsylvania state interview, you will come to a screen entitled "What kind of retirement income do you have from Pennsylvania?" Actually, you'll get one of these for each 1099-R you enter on the federal.
The second line identifies which 1099-R this screen is referring to. The screen says "Pennsylvania needs us to get really specific about the kind of retirement income you're receiving from [name]." (where [name] is the name you gave your 1099-R on the federal return).).
This screen wants to know what type of pension this is since some pensions are taxable in Pennsylvania.
At the box entitled "State Type Code", pull down the menu.
Choose "I'm eligible; plan's eligible (no PA tax)" if the following applies:
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You are eligible if you were eligible to retire under your plan's rules (as opposed to early).
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The plan is eligible if it meets Pennsylvania rules. See this Pennsylvania state website for more information.
