topic PA early withdrawal 401k what to choose and how to determine basis in Retirement tax questions

PA early withdrawal 401k what to choose and how to determine basis

arubadawn — Sat, 01 Feb 2025 20:38:15 GMT

My husband took an early withdrawal from his 401k and rolled the rest into an IRA when he lost his job. I'm in the state side of turbotax and it is asking us to Choose the description or type of retirement distribution that best matches your Pennsylvania retirement from the list below. The code he has is a "1". I'm thinking it is early distribution from 401k.... Is that correct ? He is only 51 and not eligible to retire. Then it asks for a basis but no explanation what that is?

Re: PA early withdrawal 401k what to choose and how to determine basis

MaryK4 — Sat, 01 Feb 2025 20:42:31 GMT

Yes, you would select Early distribution from 401k. Basis is the amount you do not pay tax on because the contributions were not deducted on a previous tax return. Generally, it applies to traditional IRAs or annuities. 401ks are pretax contributions so you have no basis. (It is deferred compensation because you did no pay tax on it when you earned it- you put it in the retirement account so it would be taxed later.)

Re: PA early withdrawal 401k what to choose and how to determine basis

azb94 — Tue, 15 Apr 2025 12:25:59 GMT

For 20 years while contributing to my 401k I was taxed by PA at my total Gross Earned Income which included contributions to my 401k unlike the Federal Withholdings. Are those taxes not considered ?

Re: PA early withdrawal 401k what to choose and how to determine basis

DianeW777 — Wed, 16 Apr 2025 22:42:35 GMT

You are not required to pay taxes on your contributions to your 401(k) if you lived in Pennsylvania (PA) while you were contributing. If you receive any earnings on the distribution then only that amount would be taxed. If you are retired nothing is taxable in PA.

@azb94