Do I have to pay local tax on a cashed out profit-sharing account?

Do I have to pay local tax on a cashed out profit-sharing account?

by Chad Schweighart, CPA | Feb 21, 2019

I closed a profit-sharing account and cashed it out when I lost my job with a company after about 15 years. I received a 1099-R for it, and they withheld both federal and state taxes. I know I have to pay a 10 percent penalty on the federal side. My question is about the local 1.7 percent taxes. It has a Distribution Code of 1 on the 1099-R, and I don't know if I have to pay local taxes on it. I'm in the York Adams Tax Bureau, and its "answer" was more confusing than anything. Do I owe the 1.7 percent tax on cashing out the profit-sharing account?

No. Retirement income is not taxable at the local level.  

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Answered by: Chad Schweighart, CPA, is an accounting manager with Gift & Associates in Mechanicsburg, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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