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But before I go any farther let me tell you I NEVER figure my own taxes I always and always use a licensed certified public accountant. If there is ever an issue with the IRS I do not want to be the one to answer any questions I let my accountant do it.
Married filing jointly.
Taxable IRA distributions: $6,960
Pension Benefits: $4,400
Social Security Benefits: $55,128 (Gross before any deductions for our Plan B's)
Total Income: $66,488
The website comes up with an estimate of only $762 due on our social security income. Mind you taxes would be more as the $762 is ONLY the tax on our social security but if we add the pensions and IRA withdrawals how much would our tax really increase?
To be on the safe side my plan is to have social security automatically deduct $100/month. Do you think that would cover me?
Oh, I am still working but I plan to actually retire on my 75th birthday which is just a few months away. And yes, I will talk to my accountant prior to doing anything.
Try this calculator. As far as I can see, you won’t pay income taxes once you’re no longer working.
Correct. IF you plan on that income after you stop working, (ie no increase in IRA withdrawals) then the standard deduction will more than absorb the miscellaneous income, and so SS will be tax free as well.
However, if you will increase IRA withdrawals to compensate for the loss of your working income, then be VERY aware of the Tax Torpedo, which has been discussed often here. If at all possible it will help to keep withdrawals low enough to stay below the income point where SS is taxed.
Correct. IF you plan on that income after you stop working, (ie no increase in IRA withdrawals) then the standard deduction will more than absorb the miscellaneous income, and so SS will be tax free as well.
However, if you will increase IRA withdrawals to compensate for the loss of your working income, then be VERY aware of the Tax Torpedo, which has been discussed often here. If at all possible it will help to keep withdrawals low enough to stay below the income point where SS is taxed.
Problem is tax on Social Security begins at $25k (single) $32k (married) have 50% of Social Security taxed. Combines even tax-free income from muni bonds.
Then from $34k (single) $44k (married) have 85% of Social Security taxed.
These limits haven't changed & are fixed unless Congress passes new law.
What is happening is more & more Americans fit into these 2 brackets. Maybe in the $25-$34 bracket at 50% isn't so bad. But jumping to 85% is a different story. There were so many stories over how the large COLA pushed people into these brackets.
What you don't see here is where the $25-$34 brackets fit into your FIT.
Take 50% of $26k or $13k && see what FIT you pay. Maybe with SD don't pay anything yet. But pay on your other income.
But 84% of $34k or $28,900 now pay FIT
You can do withholding from unemployment at 10%, each check
From Social Security have the choice of 7-10-12-22%
If your taxes are reasonably small, just pay (prior to April 15 current year) 100% of your last year's tax liability as the whole estimated tax for the current year. Even if you undershoot, ie, owe more tax this year than you paid in ES tax, they won't penalize you if you paid the same you owed last year as the whole ES tax for this year.
If your taxable income is over a certain 6-digit figure, then you have to pay 110% of last year's tax liability in ES taxes for this year, to avoid penalty if you underpay for this year.
I don't know if this is clear. Just pay 100% of last year's tax (or 110% of last year's tax if you earn more than a certain figure - or if you want to be totally sure of no penalty) once a year, ie, before April 15 current year. You can pay the ES tax for the current year at the same time when you file your taxes for last year, so you don't forget. That is very simple, even for a very old person who doesn't want to think about taxes.
For my occasional IRA withdrawals, I gross up the amount and have Schwab withhold 24%. Putting it simply, If I need $10,000 to pay for a vacation trip, I calculate the gross amount as 10,000/.76 = 13,157, then Schwab withholds 3,157.
That keeps things simple and ensures I don't have quarterly issues or any penalties for not paying estimated tax on time. And, don't have to prepare a coupon to mail to the IRS.
This is similar to what I do. I roughly figure my taxes twice a year, July and Dec. If enough isn't being withheld, I'll make an IRA withdrawal and then have a percentage withheld to ensure I get a small refund. Under payments of $1,000 are not penalized in case I mess up, so there is wiggle room.
This is similar to what I do. I roughly figure my taxes twice a year, July and Dec. If enough isn't being withheld, I'll make an IRA withdrawal and then have a percentage withheld to ensure I get a small refund. Under payments of $1,000 are not penalized in case I mess up, so there is wiggle room.
I did an IRA withdrawal in December and had 80% withheld to get my withholding up to the right amount, once I knew all the numbers for the year for vacation payoff, wife's earnings and withholdings, etc.
For the years between retirement and collecting SS I plan to live on savings -- so will have no "earnings" -- and will do Roth Conversions up to the top of the 25% bracket so that will be my only "income."
So....it looks like I might HAVE to do quarterly payments? ...especially if I don't convert until later in the year.
Would you convert late in the year?
If I already know I'm going to convert, should I go ahead and do it early?
IF I convert early and have them withhold 25%, then no quarterly payments AND I'll know my taxes are already paid.
Now that I think about it, I'm leaning toward doing it after the tax season in May.
I will have had the previous year's last paycheck and vacation payout paid in that January. So some taxes will have been paid in that first quarter.
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