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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Last year, I resigned from a job and sold my home and took ...

Customer Question

Last year, I resigned from a job and sold my home and took a new job in another state. I bought a home near my new job. I took some of my money for the down payment on the new house from a deferred compensation plan and some money from retirement plan from my previous employment. The retirement fund money was pre-taxed, so little of it counted as taxable income; however the deferred compensation money was considered taxable income. Therefore, I have a pretty big tax burden facing me. Is there any    way this can be alleviated?
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.


Unfortunately, any withdrawals that are taken from a deferred compensation plan, are taxable income at ordinary income tax rates in the year they were withdrawn. This is treated much the same as a withdrawl you would make from a traditional IRA account. Although there is not much you can do at this point to reduce the tax burden, you might be able to work out a payment plan with the IRS if paying the entire tax bill at once would be create a financial hardship. I wish I could have given you a brighter outlook, but that is just the nature of deferred compensation and the taxes that come with it.

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Thanks for the question and good luck to you in getting this worked out.

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