I read recently separately that Pennsylvania State does not tax 401k withdrawals. I retired in early January 2022, and took $25k 401k withdrawal in 2022. I, of course, indicated that while using Intuit tax software which taxed the 401k withdrawal while doing Pennsylvania State form. I paid the amount to Pennsylvania.
Please confirm whether there is Pennsylvania State tax on 401k withdrawals, and if yes, how can I get a refund of the tax that I paid on the 401k withdrawal.
Thank you for your time.
It depends.
PA does tax 401(k) withdrawals if they are paid because you retired early. However, if you took the withdrawals after you qualified for retirement and actually retired, then the payments are not subject to PA tax.
If you received the distribution after qualifying for retirement, then you would need to amend your state return to ensure the retirement income is marked as qualifying for an exclusion from PA tax. Any changes made per the instructions in this link will carryover into your state return. You will only need to amend your state return.
You should see a screen that says Federal Taxable Pensions and Annuities as shown below. When you amend, be sure to mark yes, this distribution is excludable if you meet all of the requirements to exclude the distribution.