Retirement Account Taxes

Most distributions from your MissionSquare Retirement retirement accounts are subject to federal and possibly state and local income taxes. Understanding and planning for those taxes can help you manage a key expense.

Taxes Withheld When You Request a Distribution

For most 401/457 plan account distributions, MissionSquare Retirement is required to withhold 20 percent for federal taxes. 

• You may instruct us to withhold a higher amount, but not less.
• Exception: for IRS required minimum distributions and emergency/hardship withdrawals, the default withholding is 10 percent and you may instruct us to not withhold taxes, period.
• State income tax withholding depends on the state. Some states require us to withhold taxes, some make it optional, and some do not tax retirement account distributions, period.
• Withholding rules apply to distributions that are payable to you that you intend to roll over to another eligible retirement account. A direct rollover or transfer, though, from one retirement account to another is not a taxable event.

Taxes that are withheld are generally not the amounts you actually owe — you will owe more or less depending on your specific tax situation, which will be reconciled when you file your tax return. Regardless of your withholding election, including if you elect not to withhold taxes, you are responsible for the payment of any federal and state income taxes that you owe.

Some Distributions are not Subject to Taxes

After-tax Roth contributions and, for qualified distributions, associated earnings are not subject to tax. This applies to 457 and 401(k) plan Roth assets and Roth IRAs.

401(a) plan after-tax contributions and IRA non-deductible contributions are also not subject to tax when distributed. Associated earnings, though, are taxable.

Penalty Taxes

You may be subject to an added 10 percent penalty tax if you take a distribution before you reach age 59½. Exceptions include:

• Contributions made to a 457 plan and any associated earnings, regardless of your age. (Note: assets rolled over, or transferred, to a 457 plan from a non-457 plan, may be subject to penalty taxes.)
• Distributions from a retirement plan sponsored by an employer you left in the year you turned age 55 or later.

Additional exceptions apply to 401 plans and IRAs. For more information, view the Special Tax Notice Regarding Plan Payments and the IRS website.

MissionSquare Retirement does not withhold penalty taxes.

Reporting Taxes – Tax Forms

MissionSquare Retirement will include the taxable amount of a retirement account distribution you take on your 1099-R Tax Form, which is available no later than January 31 of the following year, and which we distribute to you and the IRS. 

To view, print, and save tax forms, log in to your account and select "View Statements & Confirms" from the home page.

MissionSquare Retirement does not provide tax advice. You are encouraged to consult a tax professional to review your specific tax situation.