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My husband was terminated from his job after 23 years. We…

My husband was terminated...

My husband was terminated from his job after 23 years. We are going to have to cash out his pension so we don't lose our house. How will that affect our taxes?

Lawyer's Assistant: Has your husband discussed the termination with a manager or HR? Or with a lawyer?

He was on a last chance agreement through his union. This was his second offense. They told us there was nothing we could do

Lawyer's Assistant: Is the workplace "at will" or union? Is the job hourly or salaried?

Union and hourly

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

I'm just worried about losing most of this money to taxes.

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Answered in 26 minutes by:
4/22/2018
RobertJDFL
RobertJDFL, Lawyer
Category: Employment Law
Satisfied Customers: 15,319
Experience: Experienced in multiple areas of the law.
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Thank you for using Just Answer. I am a licensed attorney and look forward to helping you. I am reviewing your question and will reply back shortly.

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Good afternoon,

I'm so sorry to hear about your husband's job loss. When a person takes a lump sum distribution of their pension, the employer is required under federal law to withhold 20%. It is held by the federal government as a credit toward your tax liability for the year in which your payout was made. You can use that tax prepayment to reduce your tax liability when you file your tax return the following year. Or, if you overpaid your federal taxes you will be entitled to a refund of the excess taxes withheld.

Additionally, if your husband is under 59 1/2 years old, the federal government penalizes you another 10% when a lump sum distribution is made, so the withholding in that case would be 30%.

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Customer reply replied 3 months ago
the 20 percent should cover the income tax when we file next year for this year? I thought we would have to pay additional monies then. And he is only 58 and cant find a job anywhere. We also lost our company funded health care and life insurance benefits. It is a very hard time for us
Customer reply replied 3 months ago
We cant afford another payment. I would love to talk to you, but 59$ is something I don't have.

You can ignore the phone call request, sorry. Those come automatically from the website, not me.

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Because he's 58, he'll be taxed 30% (the additional 10% because he's under 59 1/2). Presumably, yes that should cover your taxes for next year.

Presumably, that should cover your taxes for the year (I don't know what your full financial situation is though, so I cannot say this for certain). But consider, for example that if you withdrew $100,000, 30% of that $30,000, well above what most people contribute in taxes based on income, meaning you should receive some of that money back in a refund.

RobertJDFL
RobertJDFL, Lawyer
Category: Employment Law
Satisfied Customers: 15,319
Experience: Experienced in multiple areas of the law.
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DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

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