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.
When you say that you are going to have your pension benefit "taxed" essentially all they are doing is withholding your tax now, so that at the end of the year when you go to do your taxes you don't have to pay a bunch in to the IRS
I think it's wise to have at least 15% withheld for taxes. This will ensure that you do not owe tax at the end of the year
You will only be taxed once on the money - you are not taxed twice.
Will I need to add the pension to my income which could possibly put me into a higher tax bracket?
Yes, your pension is taxable.
Yes, I know it's taxable but if I pay the 15% like you suggest I don't want to also have my other income taxed at a higher rate but I think your answer is saying it could? My federal tax bracket is 25% - should I have the pension taxed at 25% rather than 15%?
If your federal tax bracket is 25% then that is the amount you will need to have withheld. I was under the impression that the $930 per month was your only source of income
Do pensions also get taxed by the state? My Calif state tax bracket is 9.3%. Should I have them tax it at 35% to include both?
Typically a company does not withhold state taxes, you would have to make that savings separately. Whatever you have withheld is going to the IRS, not the state
Last question.........If I take the pension now it will be $930 per mo. but if I wait until age 65 (4 yrs) it would be $1130. I don't need the money now but everything I read online leads me to believe taking it now would be the better choice. As it relates to tax, do you agree with now rather than waiting until I actually retire?
From a tax perspective, I would take the pension benefit now, rather than later. I think you would come out ahead financially in the long haul
Excellent - thanks for your assistance.
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I just rec'd an email saying I could ask you a follow up question and I have one! After we communicated a friend of mine told me to contact the IRS to be sure about what amount of tax that should be taken out. I called the IRS and made sure he knew I still work full time and my tax current income tax bracket is 25%. The IRS Rep I spoke with told me to have 9% withheld, not the 15 or 25% you advised. Now I'm more confused then before I contacted you. What's your input?