hi,

let estimate your 2009 tax liability.

-- earnings - $40,356 - from wages?

-- $82,000 from 401K - taxable - are you taking a full distribution?

-- $18,000 from Roth IRA - not taxable - are you taking a distribution?

-- $40,356 SS benefits + Pension - we need to separate because they are taxed differently.

Total gross income (without Roth IRA distribution) $122,356

For your itemized deduction in 2009 only

mortgage interest paid in 2009 $3,316

real estate taxes - ?

property taxes -?

state taxes paid in 2009 - ?

charitable contributions - ?

other items deductible on the schedule A - ?

Please provide all these information to complete the estimation.

Social Security benefits are never fully taxable - 85% is a maximum taxable part.

To have Social Security benefits not taxable at all - here is the test - take your other taxable income plus half of your Social Security benefits - if that amount is less than $25,000 - none of your Social Security benefits are taxable.

Example - if your other taxable income = pension + taxable distributions will be $20,000 and your Social Security benefits $10,000 - none of your Social Security benefits would be taxable and your only taxable income will be $20,000.

You wrote above

-- $82,000 from 401K - taxable - are you taking a full distribution? - No about 33%

so - I assumed that you will take only 33% of your 401k plan - if that incorrect - let me know.

without the first time home buyer's credit - you will have tax liability ~$8500

Let me know if you need any help.

Unfortunately - the situation i snot as good as it seemed - I have to recalculate your estimation based on provided corrections:

So your updated estimated 2009 tax liability.

-- $82,000 - taxable distribution from 401K

-- $18,000 distribution from Roth IRA - not taxable

-- $19728 Pension - taxable

-- $15405 unemployment benefits - taxable

-- $20628 Social Security benefits 85% taxable or - $17534

Total taxable income $82000 +$19728 +$15405 +$17534 = $134667 - please verify if that correct.

Your deductions

-- standard deduction for 2009 - $5700

-- personal exemption for one person - $3650

taxable income - $125317

regular tax $28809

Because of your taxable income - $125317 - you are in 28% tax bracket - means any additional distribution will be taxed at 28%.

If your taxable income overpasses $171,550 - you will be pushed into 33% tax bracket - means - every dollar above that limit will be taxed at 33%.

There will be California state income tax - ~$11,000.

I might suggest to pay California income tax in 2009 and you will be able to itemize your deduction. You may also prepay real estate and property taxes in 2009 - that will allow to deduct them all together on the schedule A. Let me know if you need help with estimations.

Income tax is a pay-as-you-go tax, which means that tax must be paid as you earn or receive your income during the year. You can either do this through withholding or by making estimated tax payments. If you do not pay enough tax, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will have paid enough tax to avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

The penalty may be waived if:

1. The failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
2. You retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.

Let me know if you need any help.

OK,

hope we are clear now on 2009 tax liability.

For income tax purposes - taxable income is determined based on the time the income is received - unless you are in business which selected accrual accounting method.

The income averaging is available only for those in farming or fishing business and for certain distributions from pension funds.

You may not use income averaging in your situation.

Your 2010 income for tax purposes should be determined based on the time it is received.

I suggest you to list your 2010 expected income - and we will do estimation in similar manner.

As I reading the information on your reference - yes - it was income averaging in the past - The Tax Reform Act of 1986 repealed income averaging.

You may not use income averaging in your situation.

You may confirm that by calling the IRS at 1-800-829-1040

For 2010 tax liability - we need to consider only income you expect to receive in 2010.

And you may not postpone your 2009 tax liability.

Sorry if you expected a different answer.

-- $82,000 - taxable distribution from 401K

-- $18,000 distribution from Roth IRA - not taxable

-- $19728 Pension - taxable

-- $15405 unemployment benefits - taxable

-- $20628 Social Security benefits 85% taxable or - $17534

Total taxable income $82000 +$19728 +$15405 +$17534 = $134667 - please verify if that correct.

Your deductions

-- standard deduction for 2009 - $5700

-- personal exemption for one person - $3650

taxable income - $125317

regular federal tax $28809

Let me know if you need any help.

based on out assumptions - estimated tax liability:

Total Adjusted gross income - $134667

regular federal tax $28809

California state income tax ~$11,000.

You wrote above - My So sec payment is $1744/mo, $20628/yr - that what I used in estimation...

now you are telling - SoSec will be $5232 or at 85% $4447 for a total of $121,580

that is confusing...

No problem - as long as we are able to clarify and move forward - we are good!

I recalculating your tax liability with corrected SS benefits.

As we estimated above your 2009 tax liability.

-- $82,000 - taxable distribution from 401K

-- $18,000 distribution from Roth IRA - not taxable

-- $19728 Pension - taxable

-- $15405 unemployment benefits - taxable

-- $6,876 Social Security benefits 85% taxable or - $5,845

Total taxable income $82000 +$19728 +$15405 +$17534 = $122978

Your deductions

-- standard deduction for 2009 - $5700

-- personal exemption for one person - $3650

taxable income - $113628

regular federal tax $25536

Please consider to pay all California tax liability in 2009 - and you will itemize and deduct the whole amount of California state income tax - by doing that - you may more than $1000 in federal taxes.

Let me know if you need any help.