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ABC Accounting Group
ABC Accounting Group, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 712
Experience:  Business Consultant/Accounting Manager
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Starting April 2017 my husband is eligible to begin drawing

Customer Question

Good morning, starting April 2017 my husband is eligible to begin drawing from his previous employers pension that is being administered by the Pension BenefitGuaranty Corporation (PBGC). We are wondering how and or what the tax implications would be if we started drawing this money in April but put it directly into another retirement account. So basically we would get it and place it in another retirement acount. Can/if we do that will be be taxed on it beginning in April or years later when we start take no it out from another tax account. We live in Michigan.
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: The amount is like $250 per month. I don't think there is anything else unless the accountant has more questions for me.
Submitted: 9 months ago.
Category: Tax
Expert:  ABC Accounting Group replied 9 months ago.

Good Morning. Unfortunately, the monthly pension benefit you'll receive is considered taxable income. Those monthly payments can't be excluded from taxes by rolling the payment into an IRA. If you have the option of a lump-sum payment you could roll the benefit into an IRA - you have one rollover in a 12-month period and the rollover deposit needs to be within 60 days of the pension payment.

Expert:  ABC Accounting Group replied 9 months ago.

Let me know if you have any questions. Thank you.

Customer: replied 9 months ago.
Do we have to wait until the end of the year to pay taxes on this money or can the taxes be deducted from the monthly payment to us?
Expert:  ABC Accounting Group replied 9 months ago.

You can arrange through the PBGC to have the taxes withheld from the monthly check.

Customer: replied 9 months ago.
Do you know what % they would withhold from the monthly payments and do you think it is a good idea to do this or wait until the end of the year to pay taxes on it? We make about $110,000 yearly we only have a mortgage and one 12 year old son.
Expert:  ABC Accounting Group replied 9 months ago.

I would use your prior year's tax rate. It is best to pay it ahead of time to avoid any late payment penalties.

Customer: replied 9 months ago.
Thank you for your advice.
Expert:  ABC Accounting Group replied 9 months ago.

You are very welcome.