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I have a question regarding estimating a tax withholding on…

I have a question...

I have a question regarding estimating a tax withholding on retirement distribution

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Sure... I'm 58 and had to retire early because I have parkinsons disease. I receive social security disability benefits and collect about 13,000 from my schools pension plan.

Accountant's Assistant: Is there anything else the Accountant should be aware of?

I have about $245,000 to use and am going to put that into CD Ladders so I can withdraw about $50,000 a year to cover the balance of my assisted living expenses and medical expenses that medicare does not pay for. My question is... how much should I set up to withhold for that $50000.

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Answered in 1 minute by:
7/22/2017
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2,439
Experience: Certified Public Accountant
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Hi, my name is Mark. I will be happy to help you with your questions. Please give me a moment to prepare your response.

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Customer reply replied 11 months ago
Ok

What type of account is the retirement contribution coming form? Do you know how much with be allotted to medical expenses for the assisted living expense?

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Customer reply replied 11 months ago
The 13000 comes from a KPERS Kansas State retirement. The 245000 that I will be drawing from is ***** ***** mutual funds account and im trying to move it to CDs that I can use

Is the $245,000 in a retirement account?

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Customer reply replied 11 months ago
It was money I saved by putting in to mutual fund thru Financial advisor.
Customer reply replied 11 months ago
It was my retirement fund not employer.

Is it a IRA?

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Customer reply replied 11 months ago
I believe so.
Customer reply replied 11 months ago
I would imagine my assisted living med expenses would likely be 25000 a year

There is an early distribution penalty from a IRA if you are under 59 1/2. There are exclusion for medical expenses and disability. You should be excluded from the penalty. Will you have any other itemized deductions (property taxes, mortgage interest, auto tax, charitable donations)?

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Using $25,000 of medical expenses the taxes would come to just over $5,600. I used retirement income of $63,000.

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Using the standard deduction the taxes would just be above $8,900.

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Customer reply replied 11 months ago
Do I qualify for disability credit

You would qualify for the disability exclusion.

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Customer reply replied 11 months ago
Ok. I probably have another*****and medicare premium and med expenses

The additional medical expenses would decrease the the liability by about $750 reducing is to $4850.

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Customer reply replied 11 months ago
I think you are saying I'd better have them withhold 10% to cover taxes
Customer reply replied 11 months ago
Resend last response

If you have them withhold 10% of the $5,000 you should be pretty close? What state do you live in? You would also want to make sure that your state taxes are covered.

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Customer reply replied 11 months ago
I love in Iowa.
Customer reply replied 11 months ago
Live in Iowa

You would want to withhold about $1,000 for state taxes.

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Customer reply replied 11 months ago
of the $50000, 2% for state and 10% for federal.

If you use those amounts you should be covered for taxes. This is assuming that $25,000 of the assisted living expense is allocated to medical expenses.

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Customer reply replied 11 months ago
Yep...ok thx. I think that answers my question

I was happy to help. If you would take a moment to rate my response I would greatly appreciate it. This is the only way that I will receive credit for helping you today. There should be stars located above the question. If you have additional questions or need clarification I would be happy to continue the conversation. Thank you.

Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
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