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Moving to a different state after early withdrawing 401K

Forum|Forum|5 years ago
April 26, 2021
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I early withdrew my 401K (to purchase a house) in September 2020 while I lived in WA. I moved to California on December 9, 2020. Is my 401K early withdrawal subject to California state income tax given that I was only in California for 22 days in 2020? If my early withdrawal is not subject to California state tax, how can I exclude it with Turbotax?

Thanks,

David

Best answer by DawnC

When you go into Forms Mode, double click on Line 73 of the CA 540NR so it can open up the corresponding form (Other Taxes Worksheet). If the tax is for the early withdrawal, it will show up there on Line 3 of Part ll. If you double click there, it will take you to Form 3805P. Mark Box A (did you receive this distribution while a non-resident) as YES.

If the distribution is not allocated to CA, there should be no early withdrawal penalty to CA applied. Double check and make sure you only have the distribution entered once on the federal portion and that it is NOT allocated to CA anywhere in the interview.

Hal_Al

Employee

Q, Is my 401K early withdrawal subject to California state income tax given that I received while a WA resident?

A. No.

Q. How can I exclude it with Turbotax?

A. You will file as a part year resident of CA. In the state interview, you will be asked to allocate each piece of income as CA or non CA income.

L

l18davidAuthor

Hi Hal_AI,

Thanks. Following your response, I was able to exclude my early withdrawal from my California income.

However, how can I exclude California's early withdrawal penalty of 2.5% in Line 73 (Other taxes and credit recapture) in 540NR? Since my early withdrawal is excluded from my California income, the early withdrawal penalty should not be applied to me either.

Thanks,

David

DawnCAnswer

Employee

When you go into Forms Mode, double click on Line 73 of the CA 540NR so it can open up the corresponding form (Other Taxes Worksheet). If the tax is for the early withdrawal, it will show up there on Line 3 of Part ll. If you double click there, it will take you to Form 3805P. Mark Box A (did you receive this distribution while a non-resident) as YES.

If the distribution is not allocated to CA, there should be no early withdrawal penalty to CA applied. Double check and make sure you only have the distribution entered once on the federal portion and that it is NOT allocated to CA anywhere in the interview.

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