Have Tax Questions? Ask a Tax Expert for Answers ASAP
Whatever is taken out of the 401(k) and not deposited into another retirement account will be taxed in the year that it is taken out.
If you take money out of the 401(k) in October of 2013 that will counted as part of your 2013 income (unless you move it to your IRA).
But yes, you can certainly take more out in 2013 and less in 2014 if you want to have less income in 2014. Only what is taken out in 2014 will be counted as 2014 income.
Please ask if you need more discussion or clarification.
Do you forsee IRS issues when my income goes from $225,000 this year to $32,000 ? Next year ? I took out a large amount this year to purchase a home.
There is no problem with that change of income.
As you said it is easily traced to the amount that you took out.
Please ask if you need more help.
Last question, it is my understanding that Obamacare is based off of 2014 income. Have you heard anything else like income averaging for past years ? This would affect my original question.
Thank you Very much.
None of the increases in the 2014 tax law have any relation to income in a prior year. Those changes are only for tax years beginning after 2013.
In fact, there is much to be done for tax planning now due to the changes.
Since you are being proactive you might be interested in CCH's Tax Briefing highlighting 2013 year-end tax planning now available at: http://tax.cchgroup.com/downloads/files/pdfs/legislation/2013yearend.pdf
It can be a bit technical as tax practitioners are the target audience but it is quite good.
You are very welcome.
Thank you for the opportunity to be of service.