Tax question for the All Knowing Board.

[op2]

I am over 59.5. But I am not yet retired.

In 2024 I did a rollover from a pre-tax 401k to a Roth 401k. The Fed portion is taxable and I paid it. My tax software (FreeTaxUSA) also said the PA portion is taxable so I paid that too.

But I've since found out that (I think) such a rollover is NOT taxable in PA. Googling certainly seems to indicate it. So I'm amending my PA state tax return on FreeTaxUSA. When I go to the Miscellaneous section for the PA return on the website and try to change the rollover amount from what it was to 0, the software tells me something like "Are you sure you want to do this, because this money is taxable in PA if you are not retired."

I'm pretty sure I'm good if I change that number to 0 and file an amended PA state tax form but I thought I'd ask here for some reassurance. What sayeth you, O Great AKB.

Maybe my problem is I'm using a website named FreeTaxUSA. Maybe I should not be so cheap and pay for a better service. And since we're on that topic, I'd interested to know what software others use and how you like it and also if you've done such a rollover in PA and how the tax software handled it.

Much thanks in advance for any responses.

 

[Big_O]

Was that a rollover or a Roth conversion?

I would recommend using a tax expert for something like this. I do preliminary returns and quarterly estimate calculations with software but I leave it up to my accountant for the heavy lifting such as these type of situations.

 

[op2]

Was that a rollover or a Roth conversion?

I would recommend using a tax expert for something like this. I do preliminary returns and quarterly estimate calculations with software but I leave it up to my accountant for the heavy lifting such as these type of situations.

It was a Roth conversion. I guess it wasn't a rollover so sorry for the confusion on that.

I have pre-tax money in a 401k (or maybe it's a 403b but I think it's the same either way). And I converted some of it from pre-tax to Roth, paying the appropriate Fed and PA state taxes in the process. Except that now I think I didn't have to pay PA state taxes after all.

 

[s1uggo72]

It was a Roth conversion. I guess it wasn't a rollover so sorry for the confusion on that.

I have pre-tax money in a 401k (or maybe it's a 403b but I think it's the same either way). And I converted some of it from pre-tax to Roth, paying the appropriate Fed and PA state taxes in the process. Except that now I think I didn't have to pay PA state taxes after all.

so in PA a withdrawal from a 401k over the age of 59.5 is non taxable? IDK the answer but if it is, you should get a refund.

 

[rigi19040]

I have a spin off of a spin off. No idea how to calculate the actual cost.

I want to dump the spinoff. It is only worth about $500. I would GUESS the cost is between $0 and $1k. Total guess. Can I use a cost basis of $0? I would technically be over paying taxes by using a cost basis of $0. Second issue might not float. If I use a cost basis of $0, could I then still deduct a loss from another stock? That would actually benefit me, so I doubt it would float.

 

[op2]

so in PA a withdrawal from a 401k over the age of 59.5 is non taxable? IDK the answer but if it is, you should get a refund.

I ***THINK*** it's not taxable in PA, but I don't know for sure and that's why I'm here asking. I figured someone here might have done it personally before and thus would know.

 

[Nittering Nabob]

I have a spin off of a spin off. No idea how to calculate the actual cost.

I want to dump the spinoff. It is only worth about $500. I would GUESS the cost is between $0 and $1k. Total guess. Can I use a cost basis of $0? I would technically be over paying taxes by using a cost basis of $0. Second issue might not float. If I use a cost basis of $0, could I then still deduct a loss from another stock? That would actually benefit me, so I doubt it would float.

Recreating cost basis can be done accurately if you kept any records pertaining to when the parent company spun off company #1. It gets even easier if you didn’t reinvest dividends and took them in cash.

If you reinvested dividends you’ll need some basic Excel abilities.

 

[DELion]

I have done Roth 401K conversions each of the last two years and paid estimated taxes at both the federal and state level (Delaware). It appears the rules are different in PA. If all of the conversion funds remain in the 401K, they are not subject to PA tax. However if you used any portion of the rollover to pay federal taxes (i.e. funds were taken out of the 401k), the funds withdrawn to pay the federal taxes are considered taxable income at the PA state level but only if you are less than 59-1/2. Since you are over 59-1/2, I don't believe you will owe any PA tax on either rollover or withdrawals. At least that is my understanding after reviewing the info.

 

[Psu-cpa]

I am over 59.5. But I am not yet retired.

In 2024 I did a rollover from a pre-tax 401k to a Roth 401k. The Fed portion is taxable and I paid it. My tax software (FreeTaxUSA) also said the PA portion is taxable so I paid that too.

But I've since found out that (I think) such a rollover is NOT taxable in PA. Googling certainly seems to indicate it. So I'm amending my PA state tax return on FreeTaxUSA. When I go to the Miscellaneous section for the PA return on the website and try to change the rollover amount from what it was to 0, the software tells me something like "Are you sure you want to do this, because this money is taxable in PA if you are not retired."

I'm pretty sure I'm good if I change that number to 0 and file an amended PA state tax form but I thought I'd ask here for some reassurance. What sayeth you, O Great AKB.

Maybe my problem is I'm using a website named FreeTaxUSA. Maybe I should not be so cheap and pay for a better service. And since we're on that topic, I'd interested to know what software others use and how you like it and also if you've done such a rollover in PA and how the tax software handled it.

Much thanks in advance for any responses.

The ROTH conversion or in-plan ROTH transfer is not taxable in PA. Do not know your software, but unlike most states, PA is not an AGI state, meaning it does not use Federal income to determine tax, rather it has its own 8 classes of income it taxes. Therefore, most Fedeally based software does a poor job on PA.

 

[s1uggo72]

I have a spin off of a spin off. No idea how to calculate the actual cost.

I want to dump the spinoff. It is only worth about $500. I would GUESS the cost is between $0 and $1k. Total guess. Can I use a cost basis of $0? I would technically be over paying taxes by using a cost basis of $0. Second issue might not float. If I use a cost basis of $0, could I then still deduct a loss from another stock? That would actually benefit me, so I doubt it would float.

Sure you could use a basis of $0 and pay the gain on $500 depending on your income the cap gain tax might be $0. And yes you could off set any gain with a loss. In fact you could deduct up to a difference of $3000 vs your gains Not even sketchy

 

[1995PSUGrad]

I have another tax question, if anyone can help. I was given some stock as a child. It has grown a bit over the years. I would like to sell it but I have no idea how to calculate the basis for tax purposes. The accounts were opened 40-50 years ago; dividends have mostly been reinvested, so I essentially purchased small fractions of shares quarterly for the past 40+ years. How do I figure out the capital gains on that?

 

[Nitt1300]

taxes are for the little people

 

[s1uggo72]

I have another tax question, if anyone can help. I was given some stock as a child. It has grown a bit over the years. I would like to sell it but I have no idea how to calculate the basis for tax purposes. The accounts were opened 40-50 years ago; dividends have mostly been reinvested, so I essentially purchased small fractions of shares quarterly for the past 40+ years. How do I figure out the capital gains on that?

But the dividends have also been taxed each yr. So just use the value of the stock when you were given it, add in the dividends and subtract that from the sales price that will give u your gain

 

[rigi19040]

...

 

[rigi19040]

taxes are for the little people

I have a former neighbor who hasn't paid income taxes in 5 years. I don't get it. IRS hasn't caught up to her. Probably worth about $10M.

If I make it to 80 I am going to stop paying taxes and get one over on the man. F em.

 

[rigi19040]

But the dividends have also been taxed each yr. So just use the value of the stock when you were given it, add in the dividends and subtract that from the sales price that will give u your gain

The problem is calculating the dividends at various prices and various quantities. If you don't have the documentation I don't know how you would do it.

Let's say someone bought 100sh of abc stock in 1985 @$10 a share. They had div reinvestment. That is 160 quarters of dividends. Every quarter the purchase price is different and every quarter the number of shares purchased will be different.

 

[laKavosiey-st lion]

I have a former neighbor who hasn't paid income taxes in 5 years. I don't get it. IRS hasn't caught up to her. Probably worth about $10M.

If I make it to 80 I am going to stop paying taxes and get one over on the man. F em.

That’s a good way to F your kids

 

[LionJim]

That’s a good way to F your kids

Yeah, textbook.

 

[s1uggo72]

The problem is calculating the dividends at various prices and various quantities. If you don't have the documentation I don't know how you would do it.

Let's say someone bought 100sh of abc stock in 1985 @$10 a share. They had div reinvestment. That is 160 quarters of dividends. Every quarter the purchase price is different and every quarter the number of shares purchased will be different.

The dvd reinvestment is largely irrelevant. You have 160 quarters of dvd, 100 shares, calculate how much that is in $dollars. Add that number to your basis. Yes it will be off because u now have 120 shares, the 20 shares you bought from dvd investment and yrs you are getting dvd from them. You could throw that in as well but if you don’t if anything your basis will be too low and you’ll pay a little more cap gain taxes You don’t need documentation to file your taxes. You supply the basis for any stock bought in 1985. The brokerage or selling agent reports the sell side to the IRS so no worries. When filing your taxes you don’t need any documentation on the basis, just a number. That’s it if your accountant asks how you got that number, ask him if he’s a junior IRS agent. Tell him that you’d records say it’s x. That all they need. If the IRS comes around some them your work, if anything you will have under reported your basis and as mentioned paid too much in tax. They won’t care

 

[TheBigUglies]

I am no tax expert but, when you contribute to your 401k/403B in PA, the money is not pre-tax for PA Gross like it is for Fed Gross. For example, if my gross pay is $1000, pre-tax fed I contribute $100, then my gross fed pay is $900 in which I pay fed taxes. However, my PA Gross pay is still $1000 and I pay PA State income tax on the $1000. So in theory, PA should not be taxing us at both ends(When we make it, and when we take it out) because we already paid tax on the income. That being said, I am sure PA is going to want their piece of the growth(interest, dividents, etc) of the plan. This is a good question I need to dig deeper into. Every time I rollover a 401K, after a few years I get rid of the previous plan statements. BTW, I have been using Turbo Tax for the past 15 years, I will most likely hire an accounting/tax guru when I retire in about 10 years.

 

[Catch1lion]

My conclusion after reading these posts is that my accountant is probably underpaid, but not under appreciated.

 

[laKavosiey-st lion]

Moms handles all this

 

[mfb5053]

I have a former neighbor who hasn't paid income taxes in 5 years. I don't get it. IRS hasn't caught up to her. Probably worth about $10M.

If I make it to 80 I am going to stop paying taxes and get one over on the man. F em.

Whistleblower Office | Internal Revenue Service

Get information about the IRS Whistleblower Informant Award, how to apply for the award, news from the Whistleblower Office and more.

www.irs.gov

 

[1995PSUGrad]

But the dividends have also been taxed each yr. So just use the value of the stock when you were given it, add in the dividends and subtract that from the sales price that will give u your gain

A couple more questions . . . how do I find the price of the stock when it was given to me 45 years ago? I understand the dividends were taxed each year, but each quarter those dividends were used to purchase some amount of shares, those shares have changed in price over the years. Don't I have to figure out the change in price of each transaction from each quarter for the life of the stock? For example, if I was given 100 shares in 1975 but now there are 1000 shares in the account, I can understand finding the value of the 100 shares that I was originally given-although I don't know how I would do that, but what about the other 900 shares. Those were purchased in different amounts each quarter for the past 40+ years? There are a three accounts. Two of the three have been bought out and/or merged with other companies over the years, which just makes finding the prices more difficult.

 

[retsio]

May I humbly suggest two easy items -
1. Search online for Registered Agents in DE for incorporation / file with minimal effort for a 'home' based business / yearly internet and miscellaneous expenses will be tax deductible for the purpose of the 'business'
2. I presume you have an Attorney - ask who they use for their tax reporting / phone that firm and interview to evaluate their operating procedures

First a small yearly tax deduction / second will be protection if mistakes are made that need to be defended.

 

[1995PSUGrad]

The problem is calculating the dividends at various prices and various quantities. If you don't have the documentation I don't know how you would do it.

Let's say someone bought 100sh of abc stock in 1985 @$10 a share. They had div reinvestment. That is 160 quarters of dividends. Every quarter the purchase price is different and every quarter the number of shares purchased will be different.

That's my issue. I usually do my taxes myself, but when my wife and I sold our condo I took them to an accountant. I tried to get him to explain it to me, but he couldn't. I feel like I'll have this stock forever and can't sell it.

 

[s1uggo72]

A couple more questions . . . how do I find the price of the stock when it was given to me 45 years ago? I understand the dividends were taxed each year, but each quarter those dividends were used to purchase some amount of shares, those shares have changed in price over the years. Don't I have to figure out the change in price of each transaction from each quarter for the life of the stock? For example, if I was given 100 shares in 1975 but now there are 1000 shares in the account, I can understand finding the value of the 100 shares that I was originally given-although I don't know how I would do that, but what about the other 900 shares. Those were purchased in different amounts each quarter for the past 40+ years? There are a three accounts. Two of the three have been bought out and/or merged with other companies over the years, which just makes finding the prices more difficult.

now you introduced something else, if you were given the stock, (not inherited ) your cost basis is the cost basis of the giver. Your Dad gave you IBM stock in 1976, the stock was worth x. but that is not your cost basis, your basis, is your Dad's basis as it was a gift. you had a 100 shares and now you have 1000, 900 came from dividend reinvest, in that is some dividends and some appreciation. I would take the value of the 900 shares you got from reinvesting and add that to my cost basis, and use that number as my total basis. Sell the stock, and report that for a gain. and go on. If anything you might be paying too much in gains, but not all that much.

 

[s1uggo72]

That's my issue. I usually do my taxes myself, but when my wife and I sold our condo I took them to an accountant. I tried to get him to explain it to me, but he couldn't. I feel like I'll have this stock forever and can't sell it.

you could always gift the stock away to charity and take the entire value as a charitable gifts. Not a CPA, but gifting rules relative to taxes changed in 2026 so you may need a pros help.

 

[TheBigUglies]

A couple more questions . . . how do I find the price of the stock when it was given to me 45 years ago? I understand the dividends were taxed each year, but each quarter those dividends were used to purchase some amount of shares, those shares have changed in price over the years. Don't I have to figure out the change in price of each transaction from each quarter for the life of the stock? For example, if I was given 100 shares in 1975 but now there are 1000 shares in the account, I can understand finding the value of the 100 shares that I was originally given-although I don't know how I would do that, but what about the other 900 shares. Those were purchased in different amounts each quarter for the past 40+ years? There are a three accounts. Two of the three have been bought out and/or merged with other companies over the years, which just makes finding the prices more difficult.

Just did this to a DRIP(Div Reinvestment Plan) we invested in back in the 90s. Paid taxes on the dividends every year which increased our cost basis when we recently sold the investment. The custodian should be able to get a list of all the dividends issued since you owned the stock. For example, $1000 initial investment + the dividends received for 20+ years (say $100/yr) would make your cost basis approx $3000 in year 20 of ownership. If you sell the stocks for say $5000, then you would pay capital gains on $2000($5000 - $3000 = $2000). Again, I am not a tax expert so seek advice of professional and just providing some info from my experiences/research.

 

[Catch1lion]

you could always gift the stock away to charity and take the entire value as a charitable gifts. Not a CPA, but gifting rules relative to taxes changed in 2026 so you may need a pros help.

Bendapudi approved this message .

 

[rigi19040]

Just did this to a DRIP(Div Reinvestment Plan) we invested in back in the 90s. Paid taxes on the dividends every year which increased our cost basis when we recently sold the investment. The custodian should be able to get a list of all the dividends issued since you owned the stock. For example, $1000 initial investment + the dividends received for 20+ years (say $100/yr) would make your cost basis approx $3000 in year 20 of ownership. If you sell the stocks for say $5000, then you would pay capital gains on $2000($5000 - $3000 = $2000). Again, I am not a tax expert so seek advice of professional and just providing some info from my experiences/research.

How do taxes increase your cost basis?

 

[rigi19040]

The dvd reinvestment is largely irrelevant. You have 160 quarters of dvd, 100 shares, calculate how much that is in $dollars. Add that number to your basis. Yes it will be off because u now have 120 shares, the 20 shares you bought from dvd investment and yrs you are getting dvd from them. You could throw that in as well but if you don’t if anything your basis will be too low and you’ll pay a little more cap gain taxes You don’t need documentation to file your taxes. You supply the basis for any stock bought in 1985. The brokerage or selling agent reports the sell side to the IRS so no worries. When filing your taxes you don’t need any documentation on the basis, just a number. That’s it if your accountant asks how you got that number, ask him if he’s a junior IRS agent. Tell him that you’d records say it’s x. That all they need. If the IRS comes around some them your work, if anything you will have under reported your basis and as mentioned paid too much in tax. They won’t care

I don't see how anyone can calculate the cost without the documentation. The sale price is simple . That is total shares x current price when it is sold.

Let's say the stock is at $50 today. If someone sells the 120 shares the sale price is $5k for the original and $1k for the additional 20 shares.$6k total. If the stock hits $70 next month the sale price is $8400.

What is the cost basis of the additional 20 shares? The original 100 shares at $10 cost $1k. The additional 20 shares were purchased at 160 random prices that were between the all time high of $100 and all time low of $1 a share.

 

[s1uggo72]

I don't see how anyone can calculate the cost without the documentation. The sale price is simple . That is total shares x current price when it is sold.

Let's say the stock is at $50 today. If someone sells the 120 shares the sale price is $5k for the original and $1k for the additional 20 shares.$6k total. If the stock hits $70 next month the sale price is $8400.

What is the cost basis of the additional 20 shares? The original 100 shares at $10 cost $1k. The additional 20 shares were purchased at 160 random prices that were between the all time high of $100 and all time low of $1 a share.

The 20 shares will come from dividends you paid tax on each yr. Yes the first share you bought on drip will have appreciated but if anything if you just use the dividends you received as a basis your cost basis will be be too low. You may over pay on your taxes when you sell but it will be close and you’ll get your stock sold
Now any stock bought in the last 20 (?) yrs the custodian of the stock is supposed to keep track of all of this for you

 

[s1uggo72]

How do taxes increase your cost basis?

You paid tax on the dividends you received It won’t help help w the original lot but any reinvestment it will