Last year we made 94000 and I have cashed IPERS so next year will be 160000...so what is my estimated tax I will owe?
Assuming you had retirement plan under IPERS - http://www.ipers.org/ - there are two issues in connection with this distribution.
There are certain exceptions to this penalty. The following five exceptions apply to distributions from any qualified retirement plan:
The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA:
The following exceptions apply only to distributions from IRAs:
Please review if any related to your situation.
To estimate your Tax Liability we need to know your filing status? any dependents? are you using standard deduction or itemize? - what would be estimated amount? any other deductions you use?
Please let me know if any clarification needed.
Taxes, Immigration, Labor Relations
I am 47. I know about the 10% + 20% so the total I am receiving is 87,000. We have two dependents. One is in her last year in college and the other will be attending college as a freshman this year. We will be filing married, jointly.
To estimate I would need these information:
Reply to Lev's Post: 87,000 is the estimate I will recieve after both 10% and 20% that they withhold My older child will turn 23 this august and then be done. The 94,000 is combined gross wages. We do not itemize except for education. Medical we do not have enough. Does that help?
Sooo, because I accepted this you will not respond?
So, I estimated that your gross distribution will be $125,000.
This will push your income to $94,000 + $125,000 = $219,000 and your Tax Bracket will be 28%
your early distribution penalty will be 10% - $12,500
your income taxes (assuming standard deduction - $10,700 for 2007, two dependents, married filing jointly) - ~$50,000. State taxes if any - will be an additional
Because of high adjusted gross income - you will not be eligible for the educational expenses deduction.
Without distribution - your federal tax liability would be ~$12,700. - means your additional taxes would be ($50,000 - $12,700) + $12,500(penalty) = ~$49,800 plus educational credit.
Please think twice before taking distribution.
So, are saying the 87,000 is going to cost me 50,000 in extra taxes? I have done this to pay off credit card debt and school debt. So...I will end up spending or borrowing to pay off tax debt next year?
I assumed that you are going to take $125,000 gross distribution that would cost you ~$50,000 in additional taxes - this is correct. In additional to 10% penalty - you will be pushed into higher tax bracket.
By the way, you may avoid 10% penalty for amount you spend for qualified higher education expenses. To do so - you should roll over funds from your account to IRA and then take a distribution - see exemptions above.
Please plan your distribution wisely.