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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29535
Experience:  Taxes, Immigration, Labor Relations
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are withdrawals from an individual retirement fund affect payments

Resolved Question:

are withdrawals from an individual retirement fund affect payments froms social security?
Submitted: 7 years ago.
Category: Tax
Expert:  Lev replied 7 years ago.

If you below full retirement age - your social security benefits may be reduced based on your earned income.

For that purposes - only wages or self-employment income are counted. See more details HERE.

 

Distributions from retirement accounts and pension payments do not affect your social security benefits.

However such distributions are generally your taxable income and may affect if part of your social security benefits would be taxable.

To determine - you need to add other taxable income plus half of your social security benefits - and if the total is less than $25,000 (for singles) - none of your social security benefits are taxable.

 

Let me know if you need any help.

 

Lev and 4 other Tax Specialists are ready to help you
Customer: replied 7 years ago.

After the "Answer" block above, sentence number 3 says " Distributions from retirement accounts and pension payments do not affect your social security benefits".

 

Therein, sentence no. 4 seems to contridict by saying "However such distributions are generally your taxable income and may affect if part of your social security benefits would be taxable.

 

Then sentence 5 brings in soc. security as taxable up to 50% of the money recieved.

Please claify if retirement/pension withdrawals must be included in filing a tax return or NOT!

Expert:  Lev replied 7 years ago.

I will try to be more specific...

Distributions from retirement accounts and pension payments do not affect the amount of your social security benefits - means your social security benefits would not be reduced because of distributions.

However your social security benefits may be partly taxable or not - depending on your other taxable income - so distribution might affect your social security benefits in the way of taxability.

 

Distributions from retirement accounts and pension payments are generally your taxable income.

There are few exemptions however - for instance - if contributions were made with AFTER- tax funds - distributions of such funds are not taxable. Also qualified distributions from Roth IRA accounts are not taxable.

But generally - most distributions from retirement accounts and pension payments are your taxable income and should be reported on your tax return.

You should receive a reporting form 1099-R from the administrator of your retirement account or pension plan that reports taxable part of distribution in the box 2a - http://www.irs.ustreas.gov/pub/irs-pdf/f1099r.pdf

 

Let me know if you need any help.

 

Customer: replied 7 years ago.

The "distribution" to me from Pacific Life was a "rollover" from my career companies qualified pension plan. Over the last several years that has been the only "income" to pay expenses. As you noted --"After taxes income or not taxed but before taxation is taxed.

It is obvious that pension money that is received by me is taxable. What I do not understand is "adding social security received amounts to the gross when I have already been taxed throughout my working career at 7.5%.

 

Is there a difference between social sec. benefits paid from age 62 to FSA, full retirement age? Why isn't S.Sec. after tax??

Expert:  Lev replied 7 years ago.

There are many arguments that taxing social security benefits is not fair as these benefits are funded by after tax 6.2% (that is currently deducted from our wages)

At the same time half of social security is funded by employers who also contribute 6.2%.

 

Besides these arguments - current rules are - social security might be partly taxable - and that is regardless of the age, disability, etc.

Calculations are following - your other taxable income plus half of social security benefits - if the amount is below $25,000 (for single) - none of social security benefits are taxable.

Otherwise - up to 85% of social security benefits might be taxable and we need to fill the worksheet to calculate taxable amount.

If you could plan your distributions from retirement accounts and/or pension - you better avoid large distribution in a single year to reduced affect of taxability of social security benefits. But in any case you may want to estimate the tax effect of such distribution before making a decision.

 

Let me know if you need any help.