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Bill
Bill, Enrolled Agent
Category: Tax
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Experience:  EA, CEBS - 34 years experience providing financial advice
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I retired from the post office in July 2006 at age 63. I currently

Customer Question

I retired from the post office in July 2006 at age 63. I currently recieve social security but I need additional funds. Can I access my pension funds (mutual account funds) that I still have at the Post Office without losing my Social Security Benefits? If so, how much can I access? I turned 67 in March of 2010.
Submitted: 4 years ago.
Category: Tax
Expert:  Bill replied 4 years ago.

If your funds are in the Thrift Savings Plan (TSP), then you can access all of them and you will not lose any of your social security benefits. However, if the sum of your total income (including any TSP withdrawals) plus 50% of your social security benefits exceeds $25,000 ($32,000 if married filing jointly) then a portion of your benefits will be taxable.

 

http://www.irs.gov/newsroom/article/0,,id=179091,00.html

 

Customer: replied 4 years ago.
So I make roughly $1,800 in Social Security Benefits each month before they take out medicare so I recieve roughly $1,400 per month in Social Security benefits each month. I also recieve about $14,500 annually in my Postal Service pension which approximately $1700 taxes are taken out. My funds are in fact in the TSP. Hypothetically, if I took out $30,00 from the TSP, what would be the tax rate since I am already near the $25,000 limit that you stated before. Also, I need to confim that if I take out this money, it will only be taxed and I will not lose any of my Social Security Benefits.
Expert:  Bill replied 4 years ago.
Do you file single or married?
Customer: replied 4 years ago.
Single.
Expert:  Bill replied 4 years ago.

If you withdrew $30,000 then 85% ($18,360) of your social security benefits would be taxable and the tax attributable to the $30,000 withdrawal would be approximately $6,452.

 

You will not lose any of your social security benefits if you take the withdrawal because the income would be considered unearned income not earned income. You only have to pay back social security benefits when you have earned income from working and that income exceeds certain amounts.

Customer: replied 4 years ago.
What would the taxable amount be for the Social Security Portion ($18,360)? Lastly, will I recieve a transcript of these answers sent to me via email?
Expert:  Bill replied 4 years ago.

Your total taxes on your gross income ($18,360 of social security, $14,500 of pension, and $30,000 from TSP) would be approximately $9,558. This also assumes that all of your pension is taxable. If a portion of your pension is tax-free because you are recovering some of your after-tax contributions then your overall taxes will be slightly less.

Customer: replied 4 years ago.

I will accept all answers as you have been helpful but you did not confirm if I will recieve a transcript of the questions and answers sent to my email account.

 

XXXXX@XXXXXX.XXX

Expert:  Bill replied 4 years ago.

Unfortunately, you will not receive a transcript. You could print these answers out and keep them for your records.

Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3079
Experience: EA, CEBS - 34 years experience providing financial advice
Bill and other Tax Specialists are ready to help you
Customer: replied 4 years ago.

Hi Bill:

 

It's me again. Why would I be taxed on 85% of my Social Security and would I get any benefit if I "gifted" a portion of the $30,000 to my son? What is the maximum "gift" amount? I am certainly willing to pay again for this new question.

Expert:  Bill replied 4 years ago.

Since you file single, the base amount to calculate the amount of your social security benefits that will be taxable is $25,000. Because the sum of your pension plus an IRA distribution of $30,000 would push your income over certain limits, 85% of your social security benefits would be taxable. There is a worksheet in Publication 915 that can be used to calculate the taxable amount.

 

There would be no income tax benefit by gifting a portion to your son. You would still have to report the IRA distribution as taxable income.

 

The maximum amount that can be gifted without having to file a gift tax return is $13,000 per donee annually. However, this only applies to the issue of gift taxes, not income taxes.

 

See the worksheet on page 16 - http://www.irs.gov/pub/irs-pdf/p915.pdf

 

http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

 

 

 

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Bill
Bill
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EA, CEBS - 34 years experience providing financial advice