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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I should have received a pension from a prior employer beginning

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I should have received a pension from a prior employer beginning in 2000 (my 65th birthday year) but did not. Finally received approval for my pension in 2013, at which time they issued a payment in amount of $84683.81 to cover the pension for the years 2006-2013, and withheld $28640.66 for Federal Tax. How can I reduce this tax burden? Can I go back and prorate the $84k over the sever years for which it covered and refile for those years, or can I roll it over. Bear in mind that I am current 78 years old. Help please.

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

What type of pension is this? Is it a defined contribution or a defined benefit

MyVirtualCPA :

Unfortunately you cannot prorate the pension benefits for the years that they were for. You will pay tax on the benefit the year you actually receive the funds. So, this is unfortunate.

MyVirtualCPA :

And whether or not you can roll over the amount will be stipulated in your plan document. Your plan administrator should be able to inform you if this is allowed or not.

MyVirtualCPA :

Another thing to consider is the impact of receiving this on your social security benefits. Now that you have received these funds, 85% of your social security will also be taxable.

Customer:

All things considered, what is my best option?

Customer:

i.e., best option to minimize the tax burder for 2013?

Customer:

also, before I get disconnected from you, how do I get back in contact with you?

MyVirtualCPA :

Well, I hate to be the bearer of bad news, but there's not much you can do to minimize your tax burden

Customer:

The plan is entitled 'Retirement Restoration Plan (formerly the Equalization Benefit Plan)).

MyVirtualCPA :

If you don't have a business, and you're too old to contribute to retirement plans, and you don't have deductions to itemize such as home mortgage interest, medical expenses, and state taxes then there's little that can be done to mimimize the tax

MyVirtualCPA :

I couldn't tell you if rollovers were allowed unless I read the plan documents

Customer:

This seems unfair since my burden would, no doubt, been less if I had paid tax on a prorated portion in the years that they should have applied. Oh well, I can't recall anyone suggesting that the income tax rules were 100% fair. Thanks for you help.

MyVirtualCPA :

I'm truly sorry

MyVirtualCPA :

I wish there was better news to report

MyVirtualCPA :

I know that this probably wasn't the news you had hoped to hear, however I would appreciate a positive rating on my response so that I can receive credit for assisting today

Megan C and 4 other Tax Specialists are ready to help you
I see where you got disconnected from our chat. If you need anything else please reply here using the reply button below. If you have no further questions, please rate my response as "excellent" so that I may receive credit for assisting you today.

Next time you need to ask a question, you can request me directly by saying "For MyVirtualCPA" in the subject of your question. Thanks again.