Need help calculating the basis of income for a 401k early withdrawal in PA.

[ulmer-john]

I left my previous job in Dec 2017, and cashed out the relatively small amount in my 401k and Roth IRA in March 2018. I received two 1099-R forms for both the larger sum (~$2600) and the Roth IRA portion (~$160) to file with my taxes for 2018. 

I'm filling out my PA state tax return and it asks what my basis of income is for both of these. Turbo Tax instructions say to contact the plan provider for help filling this part out, so I called my plan provider and quite honestly they were not helpful at all and acted like they didn't know what the question was. I managed to get the basis of income for the Roth IRA (the customer service rep I spoke to told me it was $130) - but they got quite snippy when I asked what the basis for the 401k was, and told me my question didn't make sense and that I needed to consult my tax people.

That being said, I don't have a tax accountant and I was kind of hoping I could get some guidance here if anyone is willing to help me out.

I've read conflicting info online from Googling. Some people seem to claim that the basis would basically be a 0 because it's asking what amount I contributed to the plan post-tax, to prevent double taxing me; however, someone in a Reddit thread mentioned that PA is unique and uses something called a cost recovery, and that I need to find my pre-tax contributions to the 401k over the two years I contributed, then enter that number as the basis. They claimed that in PA, even if it's pre-tax, I only get taxed on my amount that I contributed and not the employer match portion?

I'm just so confused by all the different answers I've seen online, and seeking clarity since my plan provider only made it worse. If anyone can help me out and walk me through it like I'm completely clueless when it comes to taxes, I'd greatly appreciate it!! Thanks so much.

[re2boys]

For PA tax purposes, your basis is the sum of all your contributions into the 401k plan (do NOT count employer contributions or earnings)  minus the sum of all distributions taken in previous years.

Essentially, you get your contributions back before any part of your withdrawals are taxed by PA in the case of an early distribution (box 7 coded 1 or 2).

Your contributions to a 401K would be coded "D" in box 12 of your W2.

[ulmer-john]

So if I haven't taken any distributions in previous years and just took the full withdrawal as one lump sum disbursement, I would essentially NOT subtract anything from the basis, correct? I'd only subtract disbursements if I had previously taken some prior to the most recent? In other words if the disbursement was $2600 and I find out that I contributed $1000, and I made no disbursements other than the full amount of the 2600, my basis would be $1000? Thanks a bunch!

[re2boys]

Correct.

[ulmer-john]

Thanks. So I Called my plan provider and she told me that people usually just expect to pay double taxes on their withdrawals and that the info I was looking for (my contributions over the years to my plan) was something that wasn't readily available. She put in a request to have all my original records sent to me in five business days but apparently I'm going to have to wade through each pay check and add up the 401k contributions. Is there an easier way to do this that you know of? And am I just having bad luck with customer service reps? Because this is the third person I spoke to who Made me feel like I was asking for something unheard of.

[ulmer-john]

I just saw your comment about box D. I missed that before. I'll call them back and tell them I just need my W2's. Thanks!

[BMcCalpin]

Do you live in PA? If you do, were the contributions to your 401(k) pre-tax? That is, were they added to Wages in box 16 of your W-2? (normally, 401(k) contributions are not deductible in PA). You would notice this if (1) PA wages are larger than federal wages (box 1) by the amount of the retirement contributions, or (2) if you call the HR department of your prior employer and ask them. If this is a PA employer, they should understand the question.

Any contributions that were not deducted in PA are considered basis for PA purposes, because you have already paid tax on them.

So add up all the contributions made to your 401(k) plan in those two years (or whatever) and enter this as the basis or "cost" of the pension. 

[ulmer-john]

I really appreciate you taking the time to answer this, but I have to confess that I am still totally lost and it's probably down to my own lack of understanding rather than your answer. Are you telling me that in PA, 401k contributions are not pre-tax? Because I was always under the impression that they were pre-tax. I was always employed in PA and all my contributions were made while living in the state. I looked up my W2 from 2017, and the total in box 16 *is* larger than the total in box 1. Are you basically saying that I should be calculating the difference between boxes 16 and 1, and then basically that would be the basis for 2017?

Thank you so much again for the help and I'm sorry that this isn't clicking for me. I am learning a lot during this process. I've always just used TurboTax to help me calculate things in the past, and until this year I've had nothing out of the ordinary when it comes to filing, so all of this is new to me.