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Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2429
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I am on disability but I worked years then was in a car

Customer Question

I am on disability but I worked for 17 years then was in a car accident. The company I worked for asked anyone 56 or older if we wanted to start drawing on our pension fund or collect it all at once. I opted for the lump sum because I just got married and wanted to enjoy it in the moment. I got it November 1, 2015 and federal tax was taken out. I usually don't do the April 15th tax because of my yearly income but my husband works and has a great job. Questions: do I pay state tax on it (Alabama) and do we file together? He does have a side job and had to replace at least $10,000 or a little more and I had about $12,000 dental work. I know when I substitute for the city school system they don't take out social security or I think state tax.
Submitted: 1 year ago.
Category: Tax
Expert:  Anne replied 1 year ago.


I'm Anne. I've been preparing taxes for 27 years and I'll be happy to help you.

First, Congratulations on your marriage!

Your answer depends on the source of your retirement. Here is a list of retirement funds, etc that are not taxable to Alabama.:

As for how you should file, once you're married, it is ALMOST always better to file jointly, and that is going to be true in your case as well.

By filing jointly, your tax rate is going to be MUCH lower than if you filed "Married Filing Separately",(MFS), which has one of the highest tax rates. (Please see below:)

Also, you didn't mention if you were drawing Social Security, but if you are, and you file MFS, and you spend even 1 night together, then ALL of your social security will be taxable. By filing jointly, the maximum amount of your Social Security that could be taxable is 85%. Not a HUGE difference I know, but every little bit helps.

Your biggest savings by filing jointly will be in the $ amount of tax that you will pay.

If you have further questions, please post them here & I'll be notified.

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