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emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 2300
Experience:  IRS licensed Enrolled Agent and tax instructor
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I am being forced to take a one time significant lump sum payment

Customer Question

I am being forced to take a one time significant lump sum payment from my deferred comp plan. Does this entire payment have to be recognized as taxable income in the current year or can the income be recognized as taxable over several years?
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.
Hi. My name is ***** ***** I will be happy to help you.
If you take distribution from your retirement account, the entire distribution is usually taxable in the year it is distributed, unless you were born before 1936.
If you are younger than 59 1/2 there also will be 10% early distribution penalty unless you qualify for one of the exceptions listed here: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Tax-on-Early-Distributions
The exception only apply to the penalty, the amount will still be included in your income and taxed at your marginal tax rate.
I am sorry if that's not the answer you were hopping for.
I see you offline now. So if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.
Customer: replied 1 year ago.
Thank you Eva, but no this does not answer my question. I am very aware of the information in your answer if the distribution is a normal distribution from a 401K or IRA account. In this case the distribution is from a Deferred Comp Plan I have from my employer (and I just retired in January of this year) which was scheduled to be paid to me on an annual basis over the next 5 years. The company was just acquired and they are telling me that I must take the entire balance in one payment before the end of the year.
Expert:  emc011075 replied 1 year ago.
Unfortunately it still will have to be included in your income in the year of distribution regardless how it was scheduled to be paid. Taxable income has to be reported in the year received, there's no exception or regulation or a way to defer the reporting it. Once the distribution is available to you without any restriction it becomes taxable.
Sorry, I wish there was another way, but there's not.
Customer: replied 1 year ago.
Why have you already charged my credit card for $32? I have not indicated whether I am satisfied with your answer yet.
Expert:  emc011075 replied 1 year ago.
I am sorry, I don't have a control over the billing. I don't get paid until you accept the answer. I am guessing it is a deposit. Let me send a message to customer service who will be able to help you with billing questions. They will contact you vial e-mail.
Customer: replied 1 year ago.
How do I contact customer service?