OT: For ONLY $1000 !!!!

[T]

Hi All,

I had to quote this here:

2021 IRS Instructions for form 1040 page 27: *Partially Taxable Pensions and Annuities *

Enter the total pension or annuity pay- ments (from Form 1099-R, box 1) on line 5a. If your Form 1099-R doesn't show the taxable amount, you must use the General Rule explained in Pub. 939 to figure the taxable part to enter on line 5b. But if your annuity starting date (defined later) was after July 1, 1986, see Simplified Method, later, to find out if you must use that method to figure the taxable part. You can ask the IRS to figure the taxable part for you for a $1,000 fee. For details, see Pub. 939.

ONLY FOR $1000 !!!! AND FOR PEOPLE ON PENSIONS TOO!!!!! WHAT A DEAL!!!!!!!

Tears :'(

-T

The most dangerous words in the English language: I'm from the government and I am here to help you. (And for $1000 too!)

[Dean Hoffman]

My brother is thinking about retirement. One issue is if he will pay tax if he keeps working. Answer here:

The article was updated the end of July The short version is " If you receive Social Security benefits and continue to work and earn income, you will have to pay Social Security and Medicare taxes on that earned income.10 However, if your total income (the sum of your earned income, unearned income, and Social Security benefits) remains low enough, you will not owe federal income tax on it. If your AGI is equal to or less than the standard deduction for your filing status, your federal income tax liability likely is zero." There is a lot more in the article, of course. Government can't keep things simple.

[Ed Pawlowski]

It is simple. I do my own taxes so it it easily understood. If you don't your preparer will do it for you.

The way it is written makes it look complex. If you break it down by sentence, it become much more clear. Drop out the word "however" and make a new paragraph.

[Wade Garrett]

A guy I know who is the regional partner-in-charge of the tax practice at one of the major international accounting firms characterized a tax return as "your opening bid in a negotiation"..which the IRS most always accept. E&OE, I suppose.

[rbowman]

And how... You can choose to have up to 25% withheld from the SS benefits. If you have an IRA at some point, 72 I think now) you're required to take a minimum distribution. With my traditional IRA I could elect to have tax withheld from that also.

The withholding is voluntary but it helps with the sticker shock at you write a check for several thousand. I enjoy what I'm doing and continued to work but it does you no favors at tax time.

[invalid unparseable]

Saw this table a few days ago and chance of audit is low:

This is bound to change with the doubling of IRS staff.

[Ralph Mowery]

When I had to start taking the RMD from my IRA I had withholding from that to keep from having additional tax penelty from not paying in enough withholding tax. Seams that if you do not 'prepay' enough tax there is a penelty.

[Ed Pawlowski]

Staffing has been short and many more will retire. The numbers hired are not what the MAGA fold want you to believe.

Catching real cheats is a good thing. Audits are not a big deal for most people. I've been audited twice. Just a matter of sending in some paperwork.

If a math error got you and extra $50, not a big deal. OTOH, if you are skimming 50k, I hope they get you.

But the actual net staff increase would be far lower, as the IRS expects over 50,000 employees to retire over the next five years alone, said Natasha Sarin, Treasury counselor for tax policy and administration.

[Ed Pawlowski]

Not sure what you mean about "prepay". The money in your IRA or 401K was not taxed putting it in. If you don't start taking some out at 70

1/2 yes, you do pay a penalty for using those previously untaxed dollars to invest.

[invalid unparseable]

When I take my RMD's from IRA's and 401k set up automatically to occur near the end of the year I have Fed and state taxes deducted. If you fail to take an RMD, I believe the penalty is half the RMD. If you do not pay taxes when you get the distribution there is probably a penalty if you exceed a certain minimum.

[Scott Lurndal]

You should know better than to confuse Frank with actual facts and real citations. He'll change the argument, just wait and see.

[Ralph Mowery]

It does not matter where the money comes from. It could just as easy come from selling stock or work. When tax time comes if in the past years you did not send in enough money to the government that is close to your tax for the year they charge a penalty even though the tax is not due before the middle of April.

[Ed Pawlowski]

OK. I've never run into that. I've often had to pay end of year but it has been minimal, no penalty.

[Scott Lurndal]

It happens. For example, a company is purchased by another for cash and you hold stock; the stock is liquidated and you get an unexpected bump in your capital gains. If you don't send in an estimated tax payment in the quarter, you'll pay the penalty. It's not a huge penalty by percentage, but it is a penalty.

[invalid unparseable]

Stupid to believe the extra money was just for replacement.

[Marilyn Manson]

Note: As of 2020, the RMD age became 72 with the passage of the Secure Act. If Secure Act 2.0 passes (hopefully this year) the RMD age will be 73 or possibly higher.

What he means by "prepay" is to pay a substantial portion of your taxes in the year that you earned the money and not waiting until tax filing day to pay it all. There is a penalty for underpayment of taxes during the year you earned it, with the exception of the January 15th due date for the 4th quarter.

Do you know what the penalty is for not taking your RMD? It's 50% of what you should have taken out. Ouch!

In addition, did you know that you do not have to take your first RMD in the year you turn 72? The IRS allows you to delay your first RMD until Aril 1st of the following year. However, that does not relieve you of taking your 2nd year RMD in the year you turn 73. You have to take that one also. It's only the first year's that can be delayed.

[Marilyn Manson]

Are you aware that you do not have to take RMD's from each of your IRA's? You just have to take the *total* of all of your IRA RMD's from one or more of your IRA's. e.g if all of your IRA RMD's total $20K, you can take $20K from any one of them or $10K from 2 or whatever you want.

That does not hold true for 401(k)'s, 403(b)'s, annuities, etc. Those RMD's have to be taken separately from each plan. The sucky part about that is that some of those plans withhold 20% in Fed taxes with no option to change it. That's often one of the main reasons that people roll their 40x plans into an IRA once they separate from their company. There are a lot of other good reasons, but the 20% withholding rule is a PITA.

[Marilyn Manson]

Although the phrase "IRA withdrawals are tax as earned income" is commonly used, there is a big difference when it come to withholding taxes.

If you actually *earn* income, like from employment, the IRS expects you pay taxes as you earn it, at least once a quarter for whatever you earned that quarter (estimated of course). There can be a penalty if you don't.

However, with IRA distributions, taxes paid on any distribution(s) is considered as being paid evenly throughout the year, regardless of when you paid it. You could take distributions all year without any withholding and then pay it all in one shot in December. As long as the market cooperates, you get to keep your investments working for you.

For people who are still working beyond RMD age, one strategy is to not pay any quarterly taxes on their employment income and then have most or all of their RMD withheld for taxes.

[Marilyn Manson]

You can get the same service from HR Block, et al for way less than that. In some cases for free, based on your income. That's actually what the IRS wants you to do without saying it.

The IRS doesn't have the resources to do that math for everyone that might want it, so they price it out of reach. They don't *want* the work, so it's not even a "But we'll do it for a grand" thing. It's set that high so that no one will even ask.