Do I pay PA state tax after moving to TX?

[Tribble]

We moved from Pennsylvania to Texas in June of 08. We still have a CD earning interest in a bank in PA. Do we have to pay PA state tax for the interest earned only for the 5 months that we lived in PA or for the entire year? And if I have to pay interest for the entire year, will I have to fill out a PA state tax form each and every year for the the CD interest?
My second question, I receive a pension check each month (even though I am only 50 years old) from my job in PA that is direct deposited into my Texas bank. Do I have to pay PA state tax on that even though I reside in Texas now?

 

[LdiJ]

We moved from Pennsylvania to Texas in June of 08. We still have a CD earning interest in a bank in PA. Do we have to pay PA state tax for the interest earned only for the 5 months that we lived in PA or for the entire year? And if I have to pay interest for the entire year, will I have to fill out a PA state tax form each and every year for the the CD interest?
My second question, I receive a pension check each month (even though I am only 50 years old) from my job in PA that is direct deposited into my Texas bank. Do I have to pay PA state tax on that even though I reside in Texas now?

For 2008, you will need to file a part year return for PA. Both the interest on the bank account and the pension should be prorated for PA taxes for the period that you lived in PA. For the future, its TX income.

I would strongly recommend that you use a tax professional to handle your returns for 2008. Its difficult to get part year state returns right.

 

[Tribble]

Thank you for your reply! We are using a Texas tax preparer to do our taxes but she is a little iffy when it comes to PA state tax law. She had informed us that we would have to pay PA state taxes yearly for PA interest income, I had thought this might be incorrect. I knew for sure we would have to pay for the 5 months we lived in PA, I just wasn't sure if we had to pay PA state tax for interest earned after moving away.

We now have this new problem that she is unsure of. When I retired, we moved to Texas 2 days later. I received my first 4 months of pension checks in one lump sum after moving to TX and then I started receiving my regular monthly pension checks 4 months later. My tax preparer says that we don't need to pay PA taxes as we lived in Tx when the monthy payments started but we will have to pay PA taxes on the lump sum as it was considered "early distribution" even though we were living in TX when we received this 4 month lump sum payment. This sounds a little odd to me as well?

 

[LdiJ]

Thank you for your reply! We are using a Texas tax preparer to do our taxes but she is a little iffy when it comes to PA state tax law. She had informed us that we would have to pay PA state taxes yearly for PA interest income, I had thought this might be incorrect. I knew for sure we would have to pay for the 5 months we lived in PA, I just wasn't sure if we had to pay PA state tax for interest earned after moving away.

We now have this new problem that she is unsure of. When I retired, we moved to Texas 2 days later. I received my first 4 months of pension checks in one lump sum after moving to TX and then I started receiving my regular monthly pension checks 4 months later. My tax preparer says that we don't need to pay PA taxes as we lived in Tx when the monthy payments started but we will have to pay PA taxes on the lump sum as it was considered "early distribution" even though we were living in TX when we received this 4 month lump sum payment. This sounds a little odd to me as well?

Based on that explanation I disagree with your preparer.

You don't have to pay PA income tax on interest earned in a bank, just because the bank happens to be located in PA.

You don't have to pay PA taxes on your pension either, since none of it was received while you were living in PA, nor was it to cover any time period that you lived in PA.

I think that perhaps you might want to shop around for another preparer.

 

[anteater]

I'll just add that pension payments generally are not taxable in PA.

As long as you retire and receive distributions from a qualified pension plan by either meeting a years service or age requirement in the plan, your retirement income is not taxable for state purpose.

A qualified plan has four characteristics:
1.The plan is reduced to writing and has been communicated to the participants.
2.The plan establishes eligibility requirements for separation of service or a combination of old age or infirmity, and long-continued service.
3.The plan provides for payments to be made at regularly recurring intervals after their separation from service by retirement which continues at least until death. An option for a lump sum payments or payments does not disqualify the retirement nature of the plan as long as the other provisions are provided.
4.The plan does not permit the distribution of program benefits to any employee until termination of employment except for incidental disability benefits or the return of the employee’s previously taxed contributions and income or gains if the employee is required to contribute to the pension plan.

If the pension program is a SEP, a Keogh, a federally qualified tax sheltered annuity program or a tax deferred custodial account, an additional provision must be included in the written provisions to be a qualified pension program.
·Program benefits cannot be paid before retirement, death, disability, separation from service unforeseeable emergency or attaining the age of 59 ½ without a substantial penalty for early withdrawal.

 

[Tribble]

Thanks for the replies, I am printing this message.

 

[anteater]

Also adding... The PA Department of Revenue has a pretty extensive FAQ at:

Pennsylvania Department of Revenue