South Carolina Tax Withholding

[PLAN MAN]

I am being told by a tax examiner with the state Dept. of Revenue that on eligible rollover distributions paid directly to participants, when the federal mandatory tax withholding is 20%, South Carolina requires 7% withholding. State tax withholding is voluntary on all other distributions. When I asked for a reference source for the required withholding, the examiner could not provide one. I have not been successful in locating any information on required tax withholding. The best I can tell is the 7% is the maximum tax rate.

Does anyone have information on South Carolina's tax withholding requirements on periodic and nonperiodic distributions from retirement plans? Thanks for your help.

[david rigby]

You could try the SC website: http://www.sctax.org/default.htm

Another source of information (hardly "proof" of anything) is how Prudential withholds: http://www.prudential.com/media/managed/St...Withholding.pdf

A third source of information is to search these Message Boards. In particular, you will find some contributors who suggest the mandatory withholding for any state is zero due to federal ERISA pre-emption.

[Guest m.n.ouellette]

I am being told by a tax examiner with the state Dept. of Revenue that on eligible rollover distributions paid directly to participants, when the federal mandatory tax withholding is 20%, South Carolina requires 7% withholding. State tax withholding is voluntary on all other distributions. When I asked for a reference source for the required withholding, the examiner could not provide one. I have not been successful in locating any information on required tax withholding. The best I can tell is the 7% is the maximum tax rate.

Does anyone have information on South Carolina's tax withholding requirements on periodic and nonperiodic distributions from retirement plans? Thanks for your help.

Hi Plan Man: I am a TPA in SC and have never, ever withheld SC State Tax. BTW, 7% is our state income tax rate. I can't site you a source or anything, but it's never been an issue. One gentleman wanted to w/h to the state, and it threw us all for a loop! : )

Good luck, hope this helps to some small degree.