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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Re: IRS obligation. Do I need to file/pay 2011 income tax

Resolved Question:

Re: IRS obligation.
Do I need to file/pay 2011 income tax if: I am 68 years old (born feb.20, 1943), took early retirement at 62 but 10 months later went back to work retiring for good in Oct. 2010.

In year 2011 I lived ¨outside¨of the U.S. in the Dominican Republic for 8 months. My only source of incomew was social security ($ 18,000) and I took out ($ 90,000) from my esop. 20% was witheld for taxes.

please, what is my taxable situation?

Thankyou! Walter T.
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
Hi Walter and welcome to Just Answer!
The US tax law requires US citizens - regardless where they live - to file the tax return and report all worldwide income. As an US citizen you have certain tax responsibilities with US taxing authorities. These responsibilities are separate from your responsibilities to the country where you are a resident.
Generally - you are required to file your tax return if your taxable income is above $9500 in 2011 - assuming you are single.

For your ESOP distribution - you should receive should receive the form 1099-R - http://www.irs.gov/pub/irs-pdf/f1099r.pdf

The form 1099-R reports the total distribution in box 1 and the taxable amount - if any - in box 2a.

You will report these amounts on the form 1040 - www.irs.gov/pub/irs-pdf/f1040.pdf

line 15a - total distribution - from 1099-R box 1 - $90,000

line 15b - taxable part of distribution - from 1099-R box 2a - $90,000

line 61 - federal income tax withheld - from 1099-R box 4 - $18,000 - 20% withholding.

Because of your age - the distribution is not subject of 10% penalty.
Your social security benefits will be partly taxable. You will report these benefits
line 20a - total benefits - $18,000
line 20b - taxable part of benefits $18,000*85%=$15,300
So your adjusted gross income will be $90,000+$15,300=$105,300

Your actual tax liability will be determined when you prepare your tax return based on your total income, filing status, deductions, etc.
Assuming you are Single, standard deduction, no dependents, no other deduction s or credits - your estimated federal income taxes liability would be $19950
Minus 20% that were withheld from ESOP - $18,000
and you will need to pay an additional ~$1950
Your tax liability would be less if you are eligible for additional deductions.
Please be aware that above is a very raw estimate and you need to fill your tax forms to determine exact amounts.
Let me know if you need any help or clarification.
Customer: replied 2 years ago.
So, if they have alreaady witheld 18,000 on my esop withdrawal they will not require the additional 10% that I have paid for esop withdrawals before I was 65? and I can expect only to be paying for taxes relating to my social security. Thanks...Walter T
I understand that murphy´s law is always in effect when dealing with the IRS
Expert:  Lev replied 2 years ago.
Hi Walter,
So, if they have already withheld 18,000 on my esop withdrawal they will not require the additional 10% that I have paid for esop withdrawals before I was 65?
That is correct - first of all withholding is not your tax liability - your tax liability is determined at the time you file your tax return. The purpose of withholding - to cover your possible tax liability.
As long as the person is above 59 1/2 - ther e is no 10% early distribution penalty. Since you are 68 - that is not the issue for you.

and I can expect only to be paying for taxes relating to my social security.
You are not determine the tax liability separately for each income - but based on your combined income. Please be aware that I provided only raw estimate - you might have some additional deductions - and if so - your tax liability might be reduced substantially.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22693
Experience: Taxes, Immigration, Labor Relations
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