Why does turbo tax say I owe PA state tax on a post tax 401K distribution?

[neaswa]

My 1099R lists the full distribution amount in box 5 and box 7 is coded 7.  My employer confirms all taxes were paid.  I am retired age 63.

[re2boys · Accepted solution]

Retirement in PA:

During the PA interview, you will be asked what type of retirement plan distribution is represented by each 1099R.

If box 7 on the 1099R is coded 4 or 7, it is not taxable.  If it coded with an "D" such as 1D or 4D or 7D, it is from a commercial annuity and is taxable same as federal.

If it coded a 1 or 2 it is an early distribution and is taxable to the extent it exceeds your basis in the plan.  Your basis in the plan is the sum of all contributions you made over the years less all previous distributions from the plan. Do not include employer contributions or earnings. You may need to ask the plan administrator for this information.

See: https://revenue-pa.custhelp.com/app/answers/detail/a_id/1470/~/how-do-i-know-if-the-amount-on-my-109...

[dhillst]

Sadly - in my 2024 PA state return the 401k distribution a '7 - Normal distribution' was considered 'taxable'.  I have two 1099-R distributions from this institution.  One was for rollover funds to a different institution, and a second for funds that were distributed to me and not put into another tax deferred account (I spent the money).  This did not happen in my 2023 TurboTax return, but 2024 was slightly more complicated with rollover funds.  When I did the same entry in 2023 there was no problem with the 1099-R from this institution.  To make TurboTax believe that this distribution in 2024 is non-taxable in Pennsylvania, I have to check the 'IRA/SEP/SIMPLE box on TurboTax to state that the this was a distribution, though it actually came from my 401k plan.