What are the local earned income tax (Act 32) implications of an early distribution from retirement funds?

May 10, 2018
askacpaiconA 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.

Ask a CPA is a consumer service. If you are a member of the PICPA, we recommend that you take advantage of our e-mail discussion groups where you can get answers to technical questions from your fellow members. We also provide a Peer-to-Peer Directory as an additional member benefit.

This question was answered by PICPA staff.

***Answer originally published Sept. 9, 2015.


Pennsylvania CPA Journal

Read the latest from the Pennsylvania CPA Journal online or via the mobile app and digital edition.

Read More

CPA Now

Get the latest info on professional trends, management, and leadership skills on CPA Now.

Read More

Premier Sponsors

Platinum Sponsors

Gallagher Bollinger Logo
CPACharge


Silver Sponsors

Paychex logo
Capstan Logo
epsa USA


Bronze Sponsors

sage-logo_bright_green_rgb_2018_28469
TaxConnex_logo_TM_tagline2019
botkeeper1
Fox School of Business, Temple University


Interested in becoming a sponsor? View packages >