A client received a notice from Berkheimer comparing earnings reported to them versus earnings reported to Pennsylvania. The amount of the discrepancy resulted from Form 1099-R for an early distribution from retirement funds less the taxpayer's basis. The Berkheimer representative said they are following Act 32 in determining the taxability of this income. Can you provide guidance on this matter? The difference represents interest, dividends, and gains on the taxpayer's contribution to the retirement account, which are unearned income and shouldn't be taxable to Berkheimer. Berkheimer didn't send documentation to support their claim about following Act 32 as I requested. Thanks for any help that can be provided.
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This question was answered by PICPA staff.
***Answer originally published Sept. 9, 2015.