Solved: What is my basis in a defined benefits pension payment for PA income tax purposes? THis is an employer sponsored qualified plan to which I did not make contributions.
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What is my basis in a defined benefits pension payment for PA income tax purposes? THis is an employer sponsored qualified plan to which I did not make contributions.

 
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Level 9

What is my basis in a defined benefits pension payment for PA income tax purposes? THis is an employer sponsored qualified plan to which I did not make contributions.

Retirement plan distributions need to be reported on a PA income tax return.  Normal distributions (Box 7 coded a 4 or 7)  are not taxable on a PA income tax return.  Distributions coded 1 or 2  are taxable to the extent that the distribution exceeds your basis in the retirement account.


Your basis is the amount you contributed to the retirement plan.  You don't count earnings or employer contributions, only your own personal contributions.


Your current basis is the amount you contributed  to the plan over the years less any previous distributions taken from the plan.


You may need to consult your retirement plan statements or your retirement plan administrator for the correct numbers to calculate the basis.


Since some retirement distributions may be taxable on a PA return, the program will default to taxable.  YOu will be presented a page similar to the attached image where you tell the program what kind of distributions you receive.


If box 7 has a code of 1D or 7D, it is a commercial annuity and is taxable the same as federal.

If you made no contributions into the plan, obviously your basis is zero.



https://revenue-pa.custhelp.com/app/answers/detail/a_id/1470/related/1/session/L2F2LzEvdGltZS8xNDU1N...

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2 Replies
Level 9

What is my basis in a defined benefits pension payment for PA income tax purposes? THis is an employer sponsored qualified plan to which I did not make contributions.

Retirement plan distributions need to be reported on a PA income tax return.  Normal distributions (Box 7 coded a 4 or 7)  are not taxable on a PA income tax return.  Distributions coded 1 or 2  are taxable to the extent that the distribution exceeds your basis in the retirement account.


Your basis is the amount you contributed to the retirement plan.  You don't count earnings or employer contributions, only your own personal contributions.


Your current basis is the amount you contributed  to the plan over the years less any previous distributions taken from the plan.


You may need to consult your retirement plan statements or your retirement plan administrator for the correct numbers to calculate the basis.


Since some retirement distributions may be taxable on a PA return, the program will default to taxable.  YOu will be presented a page similar to the attached image where you tell the program what kind of distributions you receive.


If box 7 has a code of 1D or 7D, it is a commercial annuity and is taxable the same as federal.

If you made no contributions into the plan, obviously your basis is zero.



https://revenue-pa.custhelp.com/app/answers/detail/a_id/1470/related/1/session/L2F2LzEvdGltZS8xNDU1N...

View solution in original post

Level 7

What is my basis in a defined benefits pension payment for PA income tax purposes? THis is an employer sponsored qualified plan to which I did not make contributions.

First, I don't know PA income tax law, so, can't speak to that directly.

However, generally speaking, if you made no after tax contributions to the plan; or, if none of the payments made by your employer were taxable to you, then, you would have zero basis in the defined benefit plan.  In general, the only way to have some basis in a defined benefits plan is make some sort of after tax contribution to the plan.

Basis is not to be confused with vesting, or vesting rights.  Two separate and distinct things and concepts.

**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**
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