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Merlo
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: 6 years ago.
Category: Tax
Expert:  Merlo replied 6 years ago.

HelloCustomer

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that are taken from a deferred compensation plan, are taxable income at ordinary income tax rates in the year they were withdrawn.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.

If you found this answer helpful, kindly press the "Accept" key. Positive feedback is also greatly appreciated.

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

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