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

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.  

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

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

Pennsylvania CPA Journal

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

Read More


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

Read More

PICPA 2020 Premier Sponsors

Platinum Sponsor

Gallagher Bollinger Logo

Gold Sponsor

Paychex logo

Bronze Sponsor

Capstan Logo 

Interested in becoming a sponsor? Contact Kelli Comegys for packages and opportunities.