Pennsylvania BFR Orders Reassessment of Taxpayers’ Income Tax for 401(k) Dispute

The Pennsylvania Board of Finance and Revenue (BFR) ordered a refund to the taxpayers regarding a personal income tax dispute for the 2022 tax period. The taxpayers filed a joint tax return reporting taxable income, which was later reassessed by the Department of Revenue (DOR), leading to an appeal. The taxpayers claimed that the DOR erred in assessing additional tax, specifically regarding the treatment of the taxpayers’ 401(k) contributions and early distributions. The Board found that the taxpayers were entitled to exclude a portion of the early distributions from their 2022 income using the cost recovery method, as they provided ...