I got my taxes done at H & R BLOCK and I owe over $2000 to the Federal and to the State- I understand why I owe money to the Federal...Its because I took out all of my retirement money when I quit my old job and they taxed me the usuall 20% out of it....but what I dont understand is why I owe money to the State? How does that work out?
Can someone help explain all this to me?
Thanks in advance.
2007-01-28 07:22:41 · 4 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
Most states treat early distributions from a qualified retirement plan the same way that the feds to. It's fully taxable as ordinary income plus a penalty tax on top of that -- 10% in the case of the feds.
Also, when the distribution was made, federal taxes were probably withheld (though often not enough as you have learned!) but state taxes are seldom withheld. This will impact your state tax liability as you have learned!
2007-01-28 08:06:20 · answer #1 · answered by Bostonian In MO 7 · 0⤊ 0⤋
You owe due to the increase of your taxable income on your Federal and State Taxes. When you took the money out of your retirement plan, they take out Federal Taxes, but not State taxes or the Fed early withdrawl penalty. That is why you owe State none was taken out when you got the distribution.
2007-01-28 15:29:30 · answer #2 · answered by Rob 7 · 0⤊ 0⤋
Your state tax income is based on your federal taxable amount. Didn't H&R Block explain that to you??? You should have rolled that retirement over to a new plan on your own or with a new employer because that money is gone.
2007-01-28 15:27:51 · answer #3 · answered by Anonymous · 0⤊ 0⤋
"Taxes are what we pay for civilized society".
2007-01-28 15:30:17 · answer #4 · answered by Eva 5 · 0⤊ 2⤋