Waddell & Reed

Withholding of State Income Tax

Waddell & Reed Services Company may withhold state income tax on certain distributions made from retirement accounts where Fiduciary Trust Company of New Hampshire serves as custodian.

The Plan Types that may be subject to state income tax are:

  • IRAs (including Traditional, SEP, SARSEP & SIMPLE)
  • Roth IRAs
  • 403(b)(7) Tax Sheltered Custodial Accounts (TSAs)
  • Profit Sharing and Money Purchase Plans (Keoghs)

Whether your retirement account(s) is/are subject to state withholding depends on, at the time of your distribution:

  1. Your tax residence is within a state that requires state income tax to be withheld;
  2. Federal income tax is withheld from your distribution;
  3. The distribution amount is in excess of the state's exclusion amount (if applicable).

The respective state withholding will be reported on IRS Tax Form 1099-R.

Please refer to the chart below for a current list of states for which Waddell & Reed Services Company applies the mandated state income tax on certain distributions.

Required States with Withholding Tax Applied
State Withholding Amount State Exclusions Eligible Rollover Distributions*
Arkansas 3% of redemption amount No withholding for gross distributions less than $200.00 5% of redemption amount
California 10% of federal income tax amount Not Applicable Not Applicable
Delaware 5% of redemption amount unless W-4P is received Not Applicable Not Applicable
Iowa 5% of redemption amount rounded to the nearest whole dollar No withholding for gross distributions less than $3000.00 5% of redemption amount
Kansas 4.5% of redemption amount No withholding for gross distributions less than $200.00 4.5% of redemption amount
Maine 5% of redemption amount rounded to the nearest whole dollar Not Applicable 5% of redemption amount
Massachusetts 5.20% of redemption amount unless M-4P is received Not Applicable 5.20% of redemption amount unless M-4P is received
Mississippi 5% of redemption amount rounded to the nearest whole dollar State withholding applicable on only Premature distributions Not Applicable
Maryland Not required Voluntary withholding except ERD's 7.75% of redemption amount
Nebraska 5% of redemption amount IRC 408 plans (IRA, SEP, SIMPLE & SARSEP) 5% of redemption amount
North Carolina 4% of redemption amount rounded to the nearest whole dollar No withholding for gross distributions less than $200.00 Not Applicable
Oklahoma 5% of redemption amount rounded to the nearest whole dollar Not Applicable 5% of redemption amount
Oregon 8% of redemption amount $10.00 Minimum Not Applicable
Vermont 2.7% of redemption amount No withholding for gross distributions less than $200.00 5.4% of redemption amount
Virginia 4% of redemption amount IRC 408 plans (IRA, SEP, SIMPLE & SARSEP) 4% of redemption amount

*Eligible Rollover Distribution (ERD) refers to those distributions from Qualified Plans that are eligible to move between various fiduciary plan types (for example - 403(b), 401(k)) without tax consequences. These Qualified Plan types are referred to in Internal Revenue Code (IRC) 401(a) and include Profit Sharing, 401(k), Money Purchase Pension, Defined-Benefit, and ESOP. An ERD may also be from an IRC 403(b) (7) plan, which is for employees of non-profit institutions and public schools.

If an election is made to take an ERD from these plans in cash or "in kind" there is a mandatory 20% federal withholding. When this occurs, various states require withholding as indicated.

The tax information in this section of the website is for informational purposes only. It is not intended, and should not be construed, as a recommendation, or legal, tax, or investment advice. You should consult your tax advisor to answer questions about your specific situation or needs.

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