I cashed all my 403b in 2010 with no exception reasons On the 1099R of the 403b that I cashed completely in 2010 the taxable amount mentioned is $84,064.87 (I do not recall if this was the exact amount in the retierment amount or the 10% penalty was withheld and applied already). Fed tax withheld is $16,812.91 I take it this is the 20% fedral tax withheld?. No state taxes withheld (Michigan). I was told by the tax person that the $84K will be treated as an income subject to another fed income tax! (again?!) The extra income for 2010 while employed is of $9500.00 with fedral, state taxes withheld so was the Fica, ss, medicare..etc. Plus a $13,000.00 from work afternoons (no fedral or sate tax, or medicare, fica, ss..etc were withheld from this 13K ) Deductables accepted by IRS according to H&R are $11,201.00 Single 48 years old, my dependent is my mother 65 yrs old. I rent, do not own a house Does the 1099R points or mentions the 10% penalty anywhere because I do not see it! Also what is the michigan State Income Tax on all the above that qualifys (where state income tax, ss, medicare...that needs to be withheld or paid) Roughly how much tax (both fedral and state) do I owe for every thing mentioned? I will not hold you or any one else liable for the answer you furnish, I understand that any answer is not related at all to me personally or to my finances, or to my tax status, also you are not responsible for any contents of the reply. I understand that your reply is for education only, not an advice. Thanks, XXXXX XXXXX need a non-binding answer (rough, with simple language) asap, any one online now?
State/Country relating to question: Michigan
earlier answer was satisfactory, needed second opinion
Regarding the $84k that you received - the 1099R you received should have told whether or not tax was withheld. The gross amount in box 1 indicates the amount that you took as distribution. The amount in box 2 is the taxable amount - this is the amount that you have to pay tax on. The federal withholding box tells you if there was any tax withheld on the amount prior to you receiving it. The taxable income amount is included in your income and then you get credit for any taxes paid in. So, it is not getting taxed twice, it is determining what the actual tax is due. IRS mandates 20% which may or may not be enough depending on the Tax Bracket you are in and if you are subject to the early distribution penalty.
If you are subject to the 10%, the code in box 7 would be a code 1. If it is a 2 or 7 it would mean that you are not subject to the 10% penalty. If the 10% penalty were with held it would be included as part of the amount in the federal withheld box. You could have elected to have a greater percentage withheld than the 20% required to cover the penalty and tax, but it looks like all you did was the 20% based on the information provided.
If you take the $84064 plus the $9500 plus the $13000 it gives you a total income of $106564. From that you can subtract your itemized deductions, the personal exemption for yourself and a dependency exemption for your mother. So, $106564 less 1/2 of the Self Employment Tax of $995 less $11201 less $3650 less $3650 leaves you with a taxable income of $87068. Assuming you qualify for head of household status would give an Income Tax of $16616.
To that you need to add the 10% early distribution penalty of $8406 since you are indicating you did not meet any exceptions.
To that you also need to add the Social Security and Medicare tax known as self employment tax (you were able to subtract 1/2 of that above) on the $13000 since there was no withheld. As a self-employed individual you need to pay both the employee and employer portion of the SS and Medicare which is 15.3%. So on the $13000 you would owe $1989 in self employment taxes.
Note as a self employed individual you can take any expenses that you incurred as a result of earning this income which would reduce your Tax Liability.
So your federal tax liability would be $16616 plus the $8406 plus the $1989 for a total tax of $27011. That is your tax liability.
From this you would subtract what you had paid in - the federal tax withheld from the $9500 and the $16812.91 to determine what you still owe now. I am estimating that would be $9000 to $10000 depending on the wage withholding.
I hope that you can follow that. Please let me know if you have any questions.
Your Michigan state tax is approximately $4200. This less the tax you had withheld on the wages would be what you owe MI.
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27 years of preparing income tax returns - both personal and small business