Updated October 7, 2026. Quick answer: There is no Pennsylvania withholding rule for a retirement withdrawal in the documents read. The Department of Revenue says a qualifying IRA distribution taken after retirement or at 59 1/2 with no early-withdrawal penalty means “the distribution is not included in the taxpayer’s compensation”, and the withholding rules apply to compensation.
Pennsylvania withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | Not stated for retirement distributions. The withholding guide covers employer withholding on compensation, and a qualifying IRA distribution is not included in compensation |
| Rate or amount | None stated for retirement distributions; the employer wage rate in the guide is 3.07% |
| How to start or stop it | No state form is named for it; the Department’s 1099-R guide says the federal withholding box (Box 4), which mentions Form W-4P, is not applicable to Pennsylvania personal income tax |
| Direct rollover | No state withholding rule for a direct rollover is stated in the documents read; the Department’s guide separately says a qualifying rollover is not included in taxable compensation |
| Changed for 2026? | No change stated; the withholding guide read is the 01-23 edition |
What the Pennsylvania documents say
The Department of Revenue’s Personal Income Tax Guide says it treats a distribution from an IRA after retirement, death, disability, separation from service, unforeseeable emergency or age 59 1/2 as exempt retirement income if no early-withdrawal penalty is paid. In that case “the distribution is not included in the taxpayer’s compensation”.
Pennsylvania’s withholding guide, REV-415, is about employers: it says “the employer must withhold Pennsylvania personal income tax from the employee’s compensation” at “3.07%, which can be found by visiting the” department’s online service. The Department’s guide to reading a Form 1099-R gives its Pennsylvania treatment of Box 4, the box for federal tax withheld that mentions Form W-4P, as “Not applicable to PA PIT”. REV-415 adds that “Forms 1099-R showing zero Pennsylvania withholding” need not be submitted by the payer to the Department.
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. The documents read set no Pennsylvania withholding amount for it, so this page computes none: the Pennsylvania amount withheld is $0 in this illustration, and whether the distribution is taxable on the Pennsylvania return is a separate question these withholding documents do not answer.
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. The Pennsylvania documents read do not say how a direct rollover is treated for state withholding, so confirm it with the payer before choosing.
What a mover should know
This page is about Pennsylvania as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it.
What the documents do not say
- The documents read name no statute for retirement-distribution withholding, no election form, no withholding rule for a direct rollover and no change for 2026. The 3.07% figure is the employer rate for compensation, not a rate for retirement withdrawals. The guide page read is undated.
Common mistakes
- Applying the 3.07% employer rate to a retirement withdrawal; the guide ties it to compensation.
- Reading no withholding as no tax; whether a distribution is taxable in Pennsylvania is decided on the return, not by this page.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: how Pennsylvania taxes 401(k) and IRA withdrawals, Pennsylvania retirement taxes, retirement withholding calculator, and retirement taxes by state.
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Answer againSources
- Gross Compensation (PA Personal Income Tax Guide): https://www.pa.gov/agencies/revenue/forms-and-publications/pa-personal-income-tax-guide/gross-compensation
- REV-415 (SU) 01-23 General Information for Withholding Pennsylvania Personal Income Tax: https://www.pa.gov/content/dam/copapwp-pagov/en/revenue/documents/formsandpublications/formsforbusinesses/employerwithholding/documents/rev-415.pdf
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.