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withdrawal from retirement plan & tax

Forum|Forum|4 years ago
January 3, 2022
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Hi

I've just turned 60, and want to withdraw a certain amount of money from my retirement plan on a monthly basis. I understand I'm supposed to pay the federal and state taxes in advance (a bit over 20% of the withdrawn money.) because it's a company-sponsored plan.

Now, this is my question:

For example, if I withdraw $2500 every month this year, the actual money I receive would be a bit over 1900 after the taxes. Is this money ($2500 x 12=30,000) regarded as my annual income, and do I have to pay the taxes again next year during the tax-filing season? Or is it separate from my actual income from working?

Thanks for your advice in advance.

TurboTax Basic Online

Best answer by mglauner

If taxes are withheld on your retirement plan distributions, this is to help you towards paying the tax due on this income at tax time, so this is a wise thing to do.

If you took 30K annually in distributions, this is added to your other income (if any) to calculate your tax. Be sure to enter the amount of Federal Tax withheld as shown on your 1099-R when you enter it in TurboTax.

For instance, if you withdrew 30K from your retirement, and your tax due on this is amount is 3K, but your 1099-R shows you already paid Federal Tax of 2K, then tax due at tax time is only 1K. TurboTax calculates this for you after you enter your 1099-R.

Click this link for instructions on How to Enter 1099-R.

VolvoGirl

Employee

Yes the gross amount before tax withholding is added to your other income and taxed at your regular tax rate. You will get a 1099R for it to report on your tax return. You aren't paying the tax each time. It is just withholding like you had from your paychecks. You enter the full amount and will get credit for the withholding. Adding 30,000 to your income may push you into a higher tax bracket so be careful how much you take out.

C

cspyonAuthor

Got it. Thanks!

M

mglaunerAnswer

If taxes are withheld on your retirement plan distributions, this is to help you towards paying the tax due on this income at tax time, so this is a wise thing to do.

If you took 30K annually in distributions, this is added to your other income (if any) to calculate your tax. Be sure to enter the amount of Federal Tax withheld as shown on your 1099-R when you enter it in TurboTax.

For instance, if you withdrew 30K from your retirement, and your tax due on this is amount is 3K, but your 1099-R shows you already paid Federal Tax of 2K, then tax due at tax time is only 1K. TurboTax calculates this for you after you enter your 1099-R.

Click this link for instructions on How to Enter 1099-R.

C

cspyonAuthor

Okay, got it. Look at my case.

If I take $2500 every month, and taxed a bit over 20% ($600) in advance or withheld, I receive only $1900 every month. I withdraw $30,000, but what I take out is actually $22,800.

Now, I've got another gross income $30,000 (before tax).

Then, is my total income $60,000 or $52,280? And how should I get taxed?

What about my deductions here?

VolvoGirl

Employee

Yes your total income would be 60,000. Then you get to subtract the Standard Deduction or your Itemized Deductions whichever is more. That gives you your Taxable Income. Then there are many different ways to figure the tax depending on what kind of income you have, so you just can't use the tax table.

Are you married? For 2021 the standard deduction amounts are:

Single 12,550 + 1,700 for 65 and over or blind (14,250)

HOH 18,800 + 1,700 for 65 and over or blind

Joint 25,100 + 1,350 for each 65 and over or blind

Married filing Separate 12,550 + 1,350 for 65 and over or blind