I am 66 yrs.old and retired. I collect Social Security and also a monthly withdrawal from my 401(K). I have a 15% deduction from that(401k) to be paid to the Federal Tax. The investment firm I am with said Arizona does not allow them to withhold state taxes and that I must pay the state the amount determined at the end of the year. Can you explain why?

No apparent reason.

Some states just do not want to deal with retirement plan withholds.

One thing to be aware of is that if the amount of tax that you end up owing AZ at the end of the year is significant you should pay estimated tax on a quarterly basis rather than wait till the end, or else AZ might charge you interest for underpaymet of tax during the year. You should plan on paying quarterly estimated taxes to cover either (a) 90% of your 2013 tax bill, or (b) at least as much as the taxes you paid for 2012, whichever is smaller.