Federal or state income tax that is deducted from a distribution. Federal income tax must be deducted from distributions unless the recipient elects otherwise. Several states require state income tax to be withheld whenever federal tax is withheld. The payer of distributions from a qualified plan, a tax-sheltered custodial account, and/or a traditional IRA is responsible for withholding the tax. At the end of the calendar year, they will also prepare a Form 1099-R reporting the distribution. Currently, these states require state income tax withholding: CA, DE, IA, KS, MA, MS, NC, OK, OR and VT.

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