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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3004
Experience:  IRS licensed Enrolled Agent and tax instructor
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Spouse US citizen is 100% beneficiary of New York State

Customer Question

spouse US citizen is 100% beneficiary of New York State Teachers Pension plan and not at retirement age.
wants to select lump sum payment with 20% federal tax withheld
husband died before any pension payments started.
will spouse be subject to any added 10% early withdraw penalty?
are the death benefit part payments taxable?
can she use any income averaging to reduce one time tax hit? 10 yr?
does NOT want to transfer to an IRA or any other plan
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

The distribution will be taxable but she will not be subject to the early distribution penalty. She has couple of options to take it. She can roll it over into her own retirement plan or IRA or she can take lump sum distribution. She has 5 years to deplete the account, which means she doesn't have to take the entire amount in a single year. But if she choose to do so, the entire amount will be taxable in the year the distribution is made. Income averaging is not an option.

Expert:  emc011075 replied 1 year ago.

Harry, 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. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.