Cougar News Services
WASHINGTON -- In case you missed it because of the early January snow storm, a new law, signed Jan. 10, prohibits the state where you earned your retirement savings from taxing it after you move to another state, according to the U.S. Chamber of Commerce, which lobbied for passage of the measure.
Before the state source tax legislation became law, some states were aggressively asserting their right to tax out-of-state payments from pension plans, including 401(k) plans, which included tax-deferred funds.
"Now, retirees no longer will be burdened with paying taxes on their retirement income to their former states of residence where they no longer vote or use state services," said David W. Kemps, Chamber manager of employee benefits policy. "Equally important, they will be able to enjoy their retirement years free from the fear of unnecessary and expensive intrusions into their lives by the taxing authorities of their former states of residence.
"And those employees who are still working will be able to plan their retirement years free from worry about devastating income tax payments to more than one state."
Kemps also pointed out that the new law benefits employers by sparing them the complex record-keeping requirements of out-of-state taxation efforts, and employers will not be made to force compliance with state source tax laws.
"We worked to pass this bill so our members would not be held hostage to costly record-keeping requirements from out-of-state tax bureaucrats," Kemps said.
The U.S. Chamber of Commerce is the world's largest business federation, with more than 220,000 member companies, state and local chambers of commerce, and trade and professional associations. Nearly 96 percent of the Chamber's member businesses have 100 or fewer employees.