Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

Im trying to decide what to do with a retiree death benefit.

Customer Question
I'm trying to decide what...
I'm trying to decide what to do with a retiree death benefit. I would like to use half to 3/4th of it now (and I understand about the 20% witholding), and place the rest of it in an "inherit" IRA. My question is what is the best decision tax-wise - placing all of the money in the IRA and withdraw it from there or only place the portion I want to stay in the IRA in the IRA?
Submitted: 6 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 12 minutes by:
8/3/2011
Tax Professional: Lev, Tax Advisor replied 6 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,133
Experience: Taxes, Immigration, Labor Relations
Verified

LEV :

Hi and welcome to Just Answer!
Inherited funds in retirement account are taxable upon distribution. In additional - because distributed money are added to your other taxable income - you may be pushed into higher tax bracket; your adjusted gross income will be higher and that may affect other deductions and credit that you normally use.
Generally spreading distribution over several years might be preferable - however to be précised - you need to estimate your overall tax liability before taking a distribution.
There is no penalty on distribution of inherited retirement money - so generally the administrator withholds 10% to cover possible tax liability unless you specifically asking to withhold more.
Your actual tax liability is determined at the tax time based on your total income, filing status, deductions, etc - it might more or less than withheld amount.
You definitely may take out as much money as you need - Let me know if you need help to estimate your tax liability.

Customer:

I would like help estimating my tax liability. My annual income is $65K and I would like to use $34K from the death benefit right away (to pay off debt and for a 1st time home purchase). The other money I would like to place in an IRA.

LEV :

Sure - I will help you with estimations...

LEV :

Please clarify - did you inherite the money from 401k plan?
What is your filing status? Single?

LEV :

Are you below or above 65?

Customer:

My filing status is single. The money is from a retiree death benefit, so I don't believe it is a 401K.

Customer:

I'm 28.

LEV :

"retiree death benefit" - is that from life insurance? - who pays these benefits?

Customer:

My father's company pays. It is like life insurance.

LEV :

Assuming you are using standard deduction - with wages income $65,000 - your estimated tax liability is $9700.
With additional taxable distribution of $20,000 - your tax liability will be $14900.

LEV :

That means - additional taxable income of $20,000 will resuld in additional tax liability of $5200.

Customer:

But with the taxable distribution of $34K, what would my liability be?

LEV :

If you are single, with income from wages $65,000 plus taxable distribution of $34,000 - your estimated federal income tax liability would be $18,800.
If you plan to purchase a home - I suggest to do distribution in 2012 and purchase a home at the beginning of 2012 - in this case - you will itemize your deductions - including real estate taxes and mortgage interest for the whole year - so your tax liability will be partially offset by larger deductions.

LEV :

Please be sure to accept the answer. Experts are credited only if the answer is accepted.


 

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,133
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,133
30,133 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

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

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.WMatteson, 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.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, 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.

OrvilleHesperia, 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!!!!

AlexLos 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.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Form 886-A Deductible Home Mortgage Interest Taxpayer has
Form 886-A Deductible Home Mortgage Interest Taxpayer has $1,000,000 in Grandfathered debt. Line 9 Form 886-A - is this line amount after deducting the garandfathered debt… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Suppose my taxable income in 220,000 this year and the tax
Suppose my taxable income in 220,000 this year and the tax rate is X up to 200K, but Y for 200and over, do I pay Y on the full 220K or just that above 200K? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Figure out how much is my tax liability + my capital gains +
Figure out how much is my tax liability + my capital gains + depreciation recapture tax … read more
Lev
Lev
Tax Advisor
30,133 satisfied customers
I am retired and my only income is SS retirement benefits.
I am retired and my only income is SS retirement benefits. My wife works and will make about $40,000.00 in 2017. I want to file married filing separate for 2017 - avoiding an any tax on my SS benefits… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Does a go fund me account create a tax liability or is it
does a go fund me account create a tax liability or is it considered a donation? It is for assistance in covering medical bills. … read more
abci168
abci168
Principal
27 satisfied customers
Mortgage Interest Taxpayer inherited two homes in the same
Mortgage InterestTaxpayer inherited two homes in the same year. One from each parent, both were primary resident of deceased parent. Deceased parents were divorced and both died within 12 months of ea… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
If your taxable income is $0 (actually negative) is there a
If your taxable income is $0 (actually negative) is there a penalty for late filing? Do you need to file at all? What is the 2016 filing deadline with an extension?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,463 satisfied customers
I have a income and my real estate taxes on my home doesn't
I have a income and my real estate taxes on my home doesn't not seem to affect the amount I owe in taxes on the 1040 , what is the reason for this?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,463 satisfied customers
Sell of property tax liability. Ca. Bought home 25 yrs ago
bought home 400,000 selling 2.5 mil. Invested 500,000 owe 800,000… read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,310 satisfied customers
My friend owes more than 25000 in tax liability for year
My friend owes more than 25000 in tax liability for year 2014 and filed his taxes in year 2017. Now the penalty and interest alone is around 15000 (including state's). Is there any possibility to get … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
When does the Florida sales tax liability due to the DOR'
When does the Florida sales tax liability due to the DOR' invoice & delivery or title registration with the county tag office? … read more
abci168
abci168
Principal
27 satisfied customers
I am looking for information about my tax liability if I
I am looking for information about my tax liability if I were to move to sweden on my retirement incomes. I think I have the USA portion figured out, it is the Swedish tax that I am concerned with … read more
Lev
Lev
Tax Advisor
30,133 satisfied customers
I'd like to know the tax liability of having a trust fund on
I'd like to know the tax liability of having a trust fund on my name? … read more
Lev
Lev
Tax Advisor
30,133 satisfied customers
Since my adjusted gross income is over $100,000, I can't
Since my adjusted gross income is over $100,000, I can't take the rental loss that I have even though I was actively maintaining the property. Since I have a mortgage and property taxes on that rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Dependent Children. 1. Taxpayer's adjusted gross income is
Dependent Children.1. Taxpayer's adjusted gross income is over $ 800K so personal exemptions are phased out. 2. Taxpayer's children are between ages 12 - 17. 3. All three children have earned income o… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Please estimate my IRS and CA-540 tax liability for 2017.
Please estimate my IRS and CA-540 tax liability for 2017. Plan to file, "Married filing separately" Gross salary income: $185,000. I will take early withdraw from IRA and 401K funds towards purchasing… read more
Lev
Lev
Tax Advisor
30,133 satisfied customers
Shouldn't my standard deduction lower the amount of taxes I
Shouldn't my standard deduction lower the amount of taxes I owe? … read more
Lev
Lev
Tax Advisor
30,133 satisfied customers
Can you still deduct mortgage interest and real estate taxes
Can you still deduct mortgage interest and real estate taxes payments? … read more
Lev
Lev
Tax Advisor
30,133 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x