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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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I cashed in my pera and they took 20% out . I will

Customer Question

I cashed in my pera and they took 20% out for federal. I will make about 11000 this year. I am 52 so I will get charged the 10% penalty for early with drawal. The original amount was 17000 and I received a check for 13670. Any idea how much I will pay at tax time
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
As you might know - 20% withholding is NOT your actual tax liability.The actual tax liability will be calculated on your tax return - and the purpose of withholding to cover possible liability.Thus - if withholding is more than your liability - you will claim a refund at the tax time.Assuming you are Single, - standard deduction - no dependents - no other deductions or credits - with taxable income from wages $11,000 - your estimated tax liability would be ~$50With additional income from retirement plan distribution $17,000 - your total income tax liability is estimated as $2200 plus additional early distribution tax 10% - $1700 - total $3900MINUS 20% withholding $3400That means - you may expect additional tax liability ~$500 to be paid with your tax return.
Customer: replied 1 year ago.
I do have to dependents, so where would that put me
Customer: replied 1 year ago.
Oops 2
Expert:  Lev replied 1 year ago.
So - you have two dependents - correct?what is your relation to these dependents and what are their age?
Customer: replied 1 year ago.
One is in college and she is 19 and the other daughter will be 17
Customer: replied 1 year ago.
I do qualify for earned income credit
Expert:  Lev replied 1 year ago.
Assuming you are Head of Household with two dependent children - standard deduction - with taxable income from wages $11,000 - your estimated tax refund would be ~$3300 - that woudl be mainly based on earned income credit - and because all children are above 16 - you woudl not have any child tax credit..With additional income from retirement plan distribution $17,000 - your total income tax liability is estimated as $1000 regular tax MINUS earned income credit $1700 (it will be reduced because the distribution is NOT classified as earned income) plus additional early distribution tax 10% - $1700 - total $1000MINUS 20% withholding $3400 - and you still may expect a refund of $1400.
Customer: replied 1 year ago.
But I always get pretty close to 7000 back for my tax return?
Expert:  Lev replied 1 year ago.
There are might be several issues...You used to have additional $1000 per each child who is below 17...Because both your children are above 17 - there is no child tax credit anymore...You might have income tax withholding from wages that is credited back to you - we need to verify thatIf you will use head of household filing status - you may get additional $300 in refund.I am not clear where $7000 is coming - but if you provide your tax return - I will verify.
Customer: replied 1 year ago.
I do file as head of house hold. My ex was receiving the 1000 child credit because he claimed them but they are in my custody, so I get earned income credit, plus the working family credit
Expert:  Lev replied 1 year ago.
Based on your information - with $11,000 and two dependent children - your earned income credit is ~$3300.So all estimations are based on that information.There is no Working Family Credit on the federal level - that is a state tax credit.All information above is related to federal refund ONLY.I am not clear where you get $7000 - but I woudl be glad to verify your tax return and explain any difference.
Customer: replied 1 year ago.
What all does the information cover for taxes I pay?
Expert:  Lev replied 1 year ago.
Another correction must be dome if you do NOT claim children as dependents - and ONLY use them for HOH filing status and EIC.
That is for federal income tax purposes.
.
Assuming you are Head of Household with two children for whom you do not claim dependency exemption - standard deduction - with taxable income from wages $11,000 - your estimated tax refund would be ~$3300 - that would be mainly based on earned income credit.
.
With additional income from retirement plan distribution $17,000 - your total income tax liability is estimated as $1600 regular tax MINUS earned income credit $1700 (it will be reduced because the distribution is NOT classified as earned income) plus additional early distribution tax 10% - $1700 - total $1600
MINUS 20% withholding $3400 - and you still may expect a refund of $1800 plus any federal income tax withheld from your wages.
.
Possible reasons for the difference
- your additional unearned income will reduce your earned income credit
- previously you did not have income tax liability - but because additional income - there is $1600 income tax liability.
- I do not see how it was possible to receive $7000 refund - that might be additional state refund - but not federal.
If needed - I will verify your tax return - to clarify.
So far - based on these assumptions - you still may expect a refund - but it would be much less that you anticipate.
Customer: replied 1 year ago.
That is with my state return included. I assumed you were figuring out what I will owe the state o f minnesota?
Expert:  Lev replied 1 year ago.
Yes - I figured out that you might be in Minnesota - after you mentioned the Working Family Credit.
Only some states have similar credits.
. It is similar to the federal Earned Income Tax Credit (EITC) . Both credits are refundable, which means you can receive a refund even if you don’t owe tax.
With $11000 gross wages - your MN WFC is estimated $1200
See credit table
http://www.revenue.state.mn.us/Forms_and_Instructions/m1_inst_14.pdf
.
While currently you do not pay MN state income tax - because of larger taxable income - your estimated tax liability woudl be ~$800 - and your estimated WFC will be reduced to ~$600
that will eliminate your state refund - and will likely owe ~$200 on your state level.
Customer: replied 1 year ago.
I see you only have me credit for 1 child for earned income credit. My oldest is going to college which allows me to getting the earned credit, so I should get a larger return?
Expert:  Lev replied 1 year ago.
Yes - you are correct - with two qualifying children - your EIC would be larger.Let me update estimate...Assuming you are Head of Household - standard deduction - with taxable income from wages $11,000 - your estimated tax refund would be ~$4400 (for two children) PLUS whatever income tax withheld from your paychecks (W2 box 2)see page 30 - http://www.irs.gov/pub/irs-pdf/p596.pdf- that would be mainly based on earned income credit - and because all children are above 16 - you woudl not have any child tax credit as you might had in previous years..With additional income from retirement plan distribution $17,000 - your total income tax liability is estimated as~$1500 regular tax (it would be larger than we previously estimated because you do not claim children as dependents) PLUS additional early distribution tax 10% - $1700MINUS earned income credit $3300 (it will be reduced because total income with distribution would be $28000 - see page 32)- total $100 refundYou woudl be credited for the amount of 20% withholding $3400 and withholding from your paychecks - and you still may expect a refund of ~$3500.That would be on the federal tax return.Sorry for confusion.Please be aware - these are rough estimates - and we would need to prepare your tax return to have exact refund amount.

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