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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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My children inheritance their fathers 401 k. They are 21 and

Customer Question

My children inheritance their fathers 401 k. They are 21 and 23. The state want to tax them the each the total amount, even though it they split the 401 account. They can only take out a small amount a year. They are not able to pay the the inheritance tax from the state. Also the valuation of the account went down significantly after their father died. He died May 2008 and the account went down 40 percent since then. In July, 2009 they received a request for taxes to be pay on the 401 k in a large sum that they do not have. They are planning an appeal Do you have any suggestion
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
What state do the children live in and what state did the father live in?

Customer: replied 7 years ago.
Children lives in Pennsylvania and father died in Pennsylvania
Expert:  Merlo replied 7 years ago.
Let me put your question back on the board to see if someone here is familiar with the PA inheritance tax rules

Customer: replied 7 years ago.
I think the issues are 1. How much you should be taxed on a 401K account that has decreased since May 2009(death of their father) If the 401K account took a loss, why doesn't the PA Dept of revenue accepted a a decrease taxes equal to amount loss in the 401.

2.Can both children be taxed on the total amount in the 401K, even though they have half of the amount in their names. That appears like double taxing

3.They can not withdraw money from their 401K to pay these taxes because they will have tax conssequences on the withdrawal. Can a payment plan be made for State inheritance tax like IRS

4 Should you pay interst and penalites on a tax bill that you just received notice.

5 Do you have someone experineced in estate tax law and accounting