If I could choose whether or not I could withhold state income taxes, what should i choose?
I have a PARS account that I want distributed directly to me. There is a mandatory 20% income tax withholding (federal law). So I understand that. But the distribution form is asking me whether or not I want to have state income taxes withheld. What does each option mean for me 1) if i elect to have state income taxes withheld or 2) if i elect to NOT have state income taxes withheld.
Public Comments
- oh now it appears we finally get the reason for the question it would be wise to have state income tax withheld, at least something to cover what this distribution might affect your total taxable income if it is not a large amount of distribution it probably will not matter, if it is a large amount, by all means have something withheld, for there are penalties on state income taxes too for not having enough withheld during the year when you owe
- Your tax liability at the end of the year (the total tax you owe for 2010 income) will be the same regardless of which option you choose. If you have state income taxes withheld, they will be applied to your total tax liability with any overpayment refunded to you. If you do not have state taxes withheld you increase the likelihood of owing additional state income taxes when you file your state return.
