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YOu cartainly understand everything.... Lets do an estimate of your taxes for 2013 .... hang on just a sec
I'll strt y doing a basic calculation, assuming NO withholding, then we can apply that to bet it out
Can you give me the total expected wages and other income (NOT including the 401(k) distribution)?
Hi. Appreciate your help. I expect income to be same as last year, 178K.
I expect my 'taxable income' to be the same as last year, if I didn't take this 90K. Last yrs taxable income, 135K
I am single, no other deduction or business expenses or investments or other. I'm a fairly simple tax case!
ok... the mode I use starts with gross income, so you'll see the 178 + 90 ... then we'll add the 9000 penalty, then the next step will be to net ut any withholding... just one second here
Now, what will be your annual pre-tax contributins tTO the 401(k) this year?
another piece of info the model needs is whether you use the standard deduction or itemize
Only 1100 added to 401K.
I itemize. Only charitable contributions and mortgage interest, and real estate taxes and pers property tax. Nothing else.
can you give me a ballpark number for that?
178 - 135?
My total deductions last year were $39,100 if that helps. This year should be about the same.
Does that help?
yep, just a sec now
That is itemized deductions off that worksheet.
That'll get us close
OK, here are the raw numbers, that is ... simply adding the distrbution to your ordinary income (not yet adding the 9000 penalty OR subtracting any withholding)
Now, add 90000 for the penalty portion of the tax (nd subtract any W-2 withholding + anything withheld against the TSP distribution)
SORRY! add $9,000
I expect, based on last paycheck, to have 43K federal withheld.
that is w-2 withholding
Was anything withheld AT ALL on the TSP distr?
They will automatically withhold 10%, which is 9000. And I know that is not enough.
So, I figure 43K withheld from basic pay, then 9000 for the withdrawal, total 52,000. So...how much more do I need to withhold to cover it all, if anything. That is the botXXXXX XXXXXne question.
Got it. So I should withhold about 7K more, it sounds.....
ok this is everything. but the 9000 additional penalty, so 9000 + 6402 = 15402
(Don't shoot the messenger) but the model doesn't add the additioanla 10% penalty, i was just able to add the additional 90000 as orfinary income ... so we needed to add the 9000 on top of any tax shortfall
Ok gotcha. Am I technically taxed on the entire 90K, or only 81K since I gotta pay that 9000 penalty?
90,000 THe withholding on it DOES subtract from the tax liability overall, but all qualified plan distributions are ordinary income
and then the additional 10% tax, of course, if you are under 59 and 1/2
Got it. I am under 59. Last question, are you able to tell if the state of WV will also tax that 90K in full?
If you'll notice in the model the total withholding was 52000 (that's the 43000 + the 9000)
Yes, hag on just a sec and I'll look that one up
typically, the state will tax it as ordinary income too but NOT charge the additional 10%
let me get that for you
yes, "The beginning point for West Virginia taxation is federal adjusted gross income. Therefore, any amount of the IRA distribution or pension income that is taxable and included in federal adjusted gross income is taxable on the West Virginia income tax return."
Also for WV: Tax Rate Range: Low – 3%; High – 6.5%Income Brackets: * Lowest – $10,000; Highest – $60,000Number of Brackets: 5Personal Exemptions: Single – $2,000; Married – $4,000; Dependents – $2,000Standard Deduction: None
Thus, I likely need to withhold additional for state taxes too.....
sucks to be me !!! lol
yep, sorry .. (don't know about that sucks to be you part ... you're doing OK) not a bad problem t have (making too mch money!) :)
Just found this, many states provide an estimator, WV does not, but this'll get you there:
West Virginia collects income taxes from its residents at the following rates (for single, head of household and married filing jointly taxpayers).
Read more: http://www.bankrate.com/finance/taxes/state-taxes-west-virginia.aspx#ixzz2Z2HDYA14 Follow us: @Bankrate on Twitter | Bankrate on Facebook
Yeah I know, I am not doing poorly at all. I had to deal with the aging parent thing this year, all his medical bills and assisted living and all kinds of stuff, got me seriously far in debt. So I want to take this money out to pay those debts.
Ok, thanks for your help, I do appreciate it....
Understand ... depending on interest rate cost, might make a lot of sense (certainly let you sleep at night)
yeah it sure does. And Im upside down on mortgage like everyone else in WV, so this was my only choice....
You're welcome (dealing with some of the same issues right now with my mom, so can relate)
home equity loan wouldn't work
Oh its hard! My dad lingered on for nearly 3 yrs. He had no money or pension, and I am actually in the DC area (WV panhandle), and assisted living and all that was 7000 a month! So good luck dealing with your mom. You are not alone....
Yep, probably stating the obvious here, but increasing the contributions into the plann as you can will help you get back to where you were with the least paid (sometimes if you pay yourself first, but increasing that savings a little bit, you don't really miss it)
Thanks goodness the cost isn't as high here