topic Paying 401k early withdrawal penalty to CA Tax Board for the contributions made in another state in Retirement tax questions

Paying 401k early withdrawal penalty to CA Tax Board for the contributions made in another state

emreku — Thu, 06 Jun 2019 09:12:47 GMT

I've moved from WA to CA in 2014. I have a 401k account which I contributed to when I was in WA. I did a withdrawal from that 401k in 2015 and paid the federal penalty to IRS. Now I received a notice from California Tax Board saying I need to pay them a penalty too. Not even a penny of this 401k is earned and contributed in CA. It doesn't make sense to pay that penalty to CA and I'll protest the Board's statement. I was wondering if my case makes a sense to an expert too?

You will not win as all retirement plans are income to th...

MichaelL1 — Thu, 06 Jun 2019 09:12:48 GMT

You will not win as all retirement plans are income to the sate where you reside when collecting the money.

Think of it this way, if you lived in CA and had reduced income due to 401K, then moved to WA or NV with no state income tax, you don't have to pay CA any taxes on the withdrawal.

TurboTaxMichaelL1 thank you for your response to my quest...

emreku — Thu, 06 Jun 2019 09:12:50 GMT

TurboTaxMichaelL1 thank you for your response to my question! It makes more sense now. I previously thought this was a penalty, like the federal early-withdrawal penalty for IRAs. But it seems like the 9.3% state income tax, not a penalty.