- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Retirement tax questions
It depends. An excess distribution from a Roth 401(k) is not taxable for the Federal or Pennsylvania tax return if the excess is regarding tax year 2019 and the excess is removed before April 15, 2020.
You said "Roth 401(k)," which may mean no Pennsylvania income tax will be imposed if the Roth IRA is part of an eligible employer-sponsored retirement plan.
If your Roth IRA is not part of such a plan, only the excess contributions, and not associated earnings would be taxed in Pennsylvania.
In general, your basis is the total of all your nondeductible contributions and nontaxable amounts included in rollovers made to your Roth IRA minus the total of all your nontaxable distributions.
Please see the research references below that provide you resources for the rules and an article about handling excess Roth contributions.
page 11 Eligible Employer-Sponsored Retirement Plans Pennsylvania does not impose income tax on payments you receive that are commonly recognized retirement benefits distributed from eligible employer-sponsored retirement plans. Eligible employer sponsored retirement plans can, but do not necessarily, include employer-sponsored deferred compensation plans; pension or profit sharing plans; 401(k) plans; thrift plans; thrift savings plans; and employee welfare plans. Ask your employer or plan administrator if your employer’s retirement plan is an eligible plan for PA income tax purposes. Eligible non-employer-sponsored retirement plans can, but do not necessarily, include Individual Retirement Accounts (IRAs) and Roth IRAs.
page 11 (for Roth IRA's not in an eligible employer-sponsored retirement plan) Distributions from an IRA, including a federal Roth IRA, are taxable to the extent the distribution exceeds your previous contributions.
page 26 near the bottom of the first column, number 6: Only the excess contributions by the employee and not any related earnings are taxed. A letter fro the employer/plan administrator is required for a breakdown of the employee contributions and earnings.
For additional resources:
How to Calculate (and Fix) Excess IRA Contributions
2019 Form 8606 Nondeductible IRAs Instructions
IRS Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs) beginning on page 38 for Roth IRAs and page 43 for Excess Contributions
IRS Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs) beginning on page 27 for Roth IRAs