One of our customers wants us to withhold state and federal taxes from their IRA distribution. We have never done state. Do we use the same tax % as payroll/income tax withholdings for KY? I read something that sounded like up to a certain point of IRA income would be exempt from KY income tax anyway so perhaps it is not necessary for us to do this withholding?

any help is appreciated.

Thanks!
Michelle

State tax withholding on IRA distributions in KY is totally voluntary. I am not sure why you would want to get involved in something this complex for which there is little guidance for just one customer. Other than that, you really need to be seeking the advice of a State tax professional.

We have the customer complete the section on the disbursement form that deals with withholding, usually a percentage or a flat amount. That's for federal withholding. I don't think we have ever withheld state taxes.