How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask jgordosea Your Own Question

jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3094
Experience:  I've prepared all types of taxes since 1987.
3653323
Type Your Tax Question Here...
jgordosea is online now
A new question is answered every 9 seconds

recently cashed out pension fund before 59 years old. pension

Resolved Question:

recently cashed out pension fund before 59 years old. pension fund lump sum amount approximately $44,000.00. employer took out the federal withholding 20% and the california state withholding giving a remaining balance of 33,000.00. how much penalty do i need to pay for federal and state? my 2012 wage is approximately $52,000.00 before federal and state taxes.
Submitted: 1 year ago.
Category: Tax
Expert:  jgordosea replied 1 year ago.

Greetings,

 

The penalty for early withdrawal is 10% of the amount that is taken out of the retirement plan and not put into another plan or IRA.

That is the gross distribution before taxes were withheld.

 

If the lump sum was $44,000 and you have no exception to the penalty then the penalty is 10% of that $44,000 amount that will be included in your income or $4,400.

 

Please know that the 20% is very often not enough withheld to pay the income tax plus the penalty. If the $44,000 of income is taxed at 15% and the penalty is 10% of that amount then a total of 25% of the $44K is the total due on that - not 20%>

If 20% or 8,800 was withheld and 25% or 11,000 is the actual total tax plus penalty then the balance will result in a lesser refund than in prior years or possibly a balance of tax due when you file.

 

Please ask if you need more discussion or clarification.

Thank you.

 

 

Customer: replied 1 year ago.

will i need to show the employer's tax withholding from my lump sum amount on my taxes or does this mean i lose the tax withholding amount and pay the penalty + tax on total amount between my wage + lump sum amount?


 

Expert:  jgordosea replied 1 year ago.

Hello again,

 

Similar to the W-2 that has your income and withholding from wages you will gat a 1099-R that the income and withholding from the lump sum.

 

The withholding from the pension will be added to the withholding from your wages and show up as part of the payments you have made toward your total tax as figured on the return.

 

Just like when you only had wages (and no pension) you show the income, figure your tax after deductions and credits and then compare that tax to your withholding to see if you had more than enough withheld and get a refund or too little withheld and pay in .


In the same way, next year you will show your income (both wages and lump sum pension withdrawn), figure your tax after deductions and credits and then compare that tax to your withholding (from both wages and lump sum) to see if you had more than enough withheld and get a refund or too little withheld and pay in.

 

You do not lose the withholding, but I wanted to warn you that on the lump sum that 20% withheld it is very often less than the 25% of tax that will be part of tax you figure and so this year you will have a smaller refund or even a balance due as compared to last year.

 

Hope that clarifies for you; but please ask if you need more help.

Thank you.

Customer: replied 1 year ago.

I figured I would have to pay half from the lump-sum amount for federal and state tax with penalty. Plus my wage for this year's tax. will that cover the tax situation?

Expert:  jgordosea replied 1 year ago.

Hello again,

 

Since federal will be about 25% and California a bit less than 10% a good estimate of the total tax from both is 35% of the 44,000 or about 15,400.

 

So, yes, about half of the 33,000 net or 16,500 should be enough to cover the tax.

(presuming that not much changed on your withholding from your wages and income tax on everything else).

 

Hope that clarifies for you.

Thank you for the opportunity to be of service.

 

 

 

jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3094
Experience: I've prepared all types of taxes since 1987.
jgordosea and other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
 
 
 
Chat Now With A Tax Professional
jgordosea
jgordosea
Enrolled Agent
2839 Satisfied Customers
I've prepared all types of taxes since 1987.