It’s that time of year, Taxes.

Thread Starter

killivolt

Joined Jan 10, 2010
800
So, I’ve stayed afloat last year, still have $4200 in savings between stimulus and tax return will increase, almost finished the garage taking pictures today to post in another thread I started. However, their is confusion on declaration of my pension, I’m pretty sure it wasn’t taxed, anyone else have a state pension? Is it taxed? 1099-R

Still working with vivint home security, made about 20+k and 10+k pension.

Just curious,

kv
 

wayneh

Joined Sep 9, 2010
17,152
However, their is confusion on declaration of my pension, I’m pretty sure it wasn’t taxed, anyone else have a state pension? Is it taxed? 1099-R
Are you asking about federal tax on 1099-R income, or state? It varies from state to state and I happen to live in one of just a few states that does not (yet) tax retirement income, perhaps the only blues state. About the only good thing I can say about finances in Illinois. The people voted down a referendum that would have made it easy for them to start taxing it. I feel a little more secure but I know they're coming for it.

Anyway, not all 1099-R income is the same. It can have taxable and non-taxable components and that should be revealed on the 1099. I'm using TurboTax and I could easily simulate entering your 1099-R for you to see if it makes any difference to my bottom-line tax. I wouldn't need the actual $ amount, just any codes or checkboxes appearing on the form, to see which bucket it ends up in.
 

Thread Starter

killivolt

Joined Jan 10, 2010
800
State that would be appreciated, my friends Dad lets me use his with his code, but he hasn’t Purchased it yet. I have all my Documents and W2’s.

I’ll PM you.

Thx man your awesome,

kv
 

jpanhalt

Joined Jan 18, 2008
11,088
I follow my tax program, but also Google any questions.

In Ohio, 1099-R is taxed as ordinary income. SSA-1099 (Social Security) is not taxed. It does vary by state.
 

Thread Starter

killivolt

Joined Jan 10, 2010
800
Hey @wayneh good news, didn’t think about the boxes sure enough I lucked out. No boxes checked, however, looking at box2 on my 401k I withdrew was checked.

Perfect I have no worries because it was only $400 + insignificant. I took 7k of my 401k last for 2018 but had it pre-taxed when I drew it.

Thx again for the info,

kv
 

jpanhalt

Joined Jan 18, 2008
11,088
... about the boxes sure enough I lucked out. No boxes checked, however, looking at box2 on my 401k I withdrew was checked.
There are several boxes. If you are talking about Box7, you need to check the distribution code ( 7=normal, most common), then there should be an additional box (IRA/SEP/SIMPLE). Some of the codes like 3 (disability) may give you a break. Most of the other codes seem to imply a penalty. Every 1099R I have, including one from a qualified retirement plan, have a 7 in box 7. They are 100% taxable at the Federal level
 

Thread Starter

killivolt

Joined Jan 10, 2010
800
There are several boxes. If you are talking about Box7, you need to check the distribution code ( 7=normal, most common), then there should be an additional box (IRA/SEP/SIMPLE). Some of the codes like 3 (disability) may give you a break. Most of the other codes seem to imply a penalty. Every 1099R I have, including one from a qualified retirement plan, have a 7 in box 7. They are 100% taxable at the Federal level
Luckily no boxes checked on the 1099-R, I’ll look at my 401k 1099-R still wouldn’t be much though. Also, no disability, thank goodness. :)

kv
 

jpanhalt

Joined Jan 18, 2008
11,088
I would be concerned if there was nothing in Box 7. You may be expected to provide a code. Here are some answers from the internet about what to do if box 7 is empty ("what if box 7 is blank on a 1099-R):

https://ttlc.intuit.com/community/r...s-nothing-shown-in-box-7-is-an-inval/01/98793
https://ttlc.intuit.com/community/r...xt=As dmertz points out, a,box 7 is not valid.

Since penalties on Federal taxes are so significant, I would definitely seek advice. As for your state, normal retirement distributions may not be taxed. That's unusual, however. There are so many types of retirement and tax advantaged plans. I suspect that is not a blanket exemption. Railroad retirement, for one, is treated differently as are distributions from qualified Roth plans.

However, that is possible. Before moving to "My Farm," income tax for the city in which I lived was only on earned income. When I retired, it was quite a relief from the 3% that I paid while working. I was in disbelief, so I checked with the city and got confirmation.
 

Thread Starter

killivolt

Joined Jan 10, 2010
800
I would be concerned if there was nothing in Box 7. You may be expected to provide a code. Here are some answers from the internet about what to do if box 7 is empty ("what if box 7 is blank on a 1099-R):

https://ttlc.intuit.com/community/r...s-nothing-shown-in-box-7-is-an-inval/01/98793
https://ttlc.intuit.com/community/retirement/discussion/box-7-on-a-1099-r-is-blank-no-code-northern-trust-says-there-should-not-be-a-code-turbotax-says-it/00/177884#:~:text=As dmertz points out, a,box 7 is not valid.

Since penalties on Federal taxes are so significant, I would definitely seek advice. As for your state, normal retirement distributions may not be taxed. That's unusual, however. There are so many types of retirement and tax advantaged plans. I suspect that is not a blanket exemption. Railroad retirement, for one, is treated differently as are distributions from qualified Roth plans.

However, that is possible. Before moving to "My Farm," income tax for the city in which I lived was only on earned income. When I retired, it was quite a relief from the 3% that I paid while working. I was in disbelief, so I checked with the city and got confirmation.
Glad you asked, I checked again 7 isn’t checked, however if memory serves me, I elected to have it taxed before distributing it to me. May be a factor what do you think? If they give me an option I usually take it, so I don’t have to worry about it later, if so, the IRS wants to give some back that would be cool, let‘m barrow it for a year, just wish there was interest, typically I get $3500 back, but I don’t make as much as I use too.

kv
 

jpanhalt

Joined Jan 18, 2008
11,088
Glad you asked, I checked again 7 isn’t checked, however if memory serves me, I elected to have it taxed before distributing it to me. May be a factor what do you think? If they give me an option I usually take it, so I don’t have to worry about it later, if so, the IRS wants to give some back that would be cool, let‘m barrow it for a year, just wish there was interest, typically I get $3500 back, but I don’t make as much as I use too.
kv
On all of my 1099-R's, there is no check box to characterize the distribution. The "7" is typed in the big part of box 7.* There is a second smaller box for defining whether it is SEP, etc. If you have tax withdrawn at distribution, then you need to still calculate your tax liability on the gross distribution (before tax amount). Then calculate the total amount of taxes prepaid, The difference is your refund or what you owe.

My brother and I have similar retirement incomes. He elects to have it deducted from each distribution. I do not, but I pay quarterly estimates. There is no right or wrong way. If you have 2 or 3 sources, then having it deducted before payment is a little easier. If you have a lot more than 3 sources, then paying a lump sum quarterly is a little easier, I think. Either way, the amount of tax you pay should be the same.

In either event, be sure you do not underpay the year's taxes by more than the "safe harbor" margin. Very roughly, you need to pay a minimum of 90% of your previous year's liability for the current year. But like everything taxwise, there are conditions and exceptions. With bank interest rates almost zero, e.g., at Schwab, it doesn't hurt much to overpay, as the penalties for underpayment well exceed any interest you might lose.

*Unfortunately, the box number (upper left corner) and code for normal distribution (somewhere else in the box) are the same. Are you sure there is not also a 7 there?
 

Thread Starter

killivolt

Joined Jan 10, 2010
800
Yup your correct, little 7 upper right hand with a big 7 didn’t see that. SEP no Checks. Didn’t notice the small 7 in the upper left hand corner.

Always and education available here on the site. I’ve just used Turbo Tax to do the heavy lifting, when I do my daughters, I have her go to HR Block then I do it, if it matches then I feel it was correct, then I do my own.

kv
 

Thread Starter

killivolt

Joined Jan 10, 2010
800
What a relief. :) Now we won't have to visit you at Leavenworth.
Since I'm not going to prison, I'll just be put in financial prison until I can pay back my savings account (Glad I have it) most won't.

So, the money the Gov gave me in 2020 and the second stimulus check I received they want it back not all but most of it, increasing my debt to the IRS by $2,000+, not to mention Utah State now is requiring me to pay 1k+ this year they need that buffer in their budget as well, COVID19 responses to the pandemic I would guess, never had to pay them anything before now.

Now some of you would be saying like my friend who has 5 million in assets e.g. property so what? but, he's making 8k a month while still owning his building in a prime location listing it at 1.5 million. But, when your grabbing your boot straps while the Gov. wants their money now, which in the first place, why at tax time, just to put the pinch on you! I'm perplexed why it was given only to take back and create further insult to injury, I'm just one of many who will face this issue, this year and never had to before. But (thank god) because of proper money management I have it in savings for the IRS, but it drained my saving to zero. Thank you but no thank you to the GOP and the rest of those scum suckers, this time of year is also bad, forced into mandatory time off by my employer until work picks up. Either I get another job I hate or wait to see the fall out. For me average joe American, why didn't you a..holes tell us don't spend it, cause we will wan't it back, stimulus my As.........explicative. I still have to figure out how to pay the State, I think its time to move to a State with no taxes so I can pay the damn Gov.

kv
 

Thread Starter

killivolt

Joined Jan 10, 2010
800
Out of curiosity: in USA, asking an accountant to prepare your declaration, is it expensive?
Depends on the declaration and if your planning to itemize, which those like my friend would hire a Tax Attorney “not an accountant” to complete their taxes, people like me with a simple form don’t have that advantage and in times past didn’t benefit from an accountant, I owned my own business and had property at one time, I paid not to owe the Gov or as little as possible to reduce my expenses, paying a quarterly tax was enough throughout the year to only end up paying them more for any supposedly under payment, they assume you will or expect it, thats when Itemizing comes in handy, profit losses etc. So, limiting that while in business is logical.

kv
 

Papabravo

Joined Feb 24, 2006
16,173
Out of curiosity: in USA, asking an accountant to prepare your declaration, is it expensive?
$400-$600 per year which includes quarterly estimates of tax owed along with preparation and filing of the actual return. The peace of mind in knowing that I don't have to worry about keeping up with changes in the tax law make it an extreme value proposition for me. My returns were more complicated while I was working and had Oil and Gas Exploration investments.
 

atferrari

Joined Jan 6, 2004
4,330
Depends on the declaration and if your planning to itemize, which those like my friend would hire a Tax Attorney “not an accountant” to complete their taxes, people like me with a simple form don’t have that advantage and in times past didn’t benefit from an accountant, I owned my own business and had property at one time, I paid not to owe the Gov or as little as possible to reduce my expenses, paying a quarterly tax was enough throughout the year to only end up paying them more for any supposedly under payment, they assume you will or expect it, thats when Itemizing comes in handy, profit losses etc. So, limiting that while in business is logical.

kv
$400-$600 per year which includes quarterly estimates of tax owed along with preparation and filing of the actual return. The peace of mind in knowing that I don't have to worry about keeping up with changes in the tax law make it an extreme value proposition for me. My returns were more complicated while I was working and had Oil and Gas Exploration investments.
My accountant charges $150 to do my wife's and my taxes.
Do you need to supply him some data every month, isn't it?

In my case, I hired one some 20 years ago and everything is running smoothly. Every month I go there to bring my invoices / tickets still in paper (what you read). The compensation is the beautiful girl at the front desk.

All in all, if you are a lucky person down here, you could be paying many of the 160++ taxes currently in force.
 

Papabravo

Joined Feb 24, 2006
16,173
Do you need to supply him some data every month, isn't it?

In my case, I hired one some 20 years ago and everything is running smoothly. Every month I go there to bring my invoices / tickets still in paper (what you read). The compensation is the beautiful girl at the front desk.

All in all, if you are a lucky person down here, you could be paying many of the 160++ taxes currently in force.
When I worked as a consultant, I got in the habit of providing my information to the accountant quarterly so I could make my estimated payments. The rule on how much you had to pay and when were arcane and difficult to follow. Since I have retired I have maintained that practice except for a different reason. When I take mandatory withdrawals from my retirement account, I can specify almost any amount to be withheld for taxes in the year I take that withdrawal. When you pay your taxes via "withholding" there are no penalties or interest that are assessed if you underpay what what you owe. If I engage in stock trading in December and have excessive capital gains. I just pay what I owe by April 15th with no muss and no fuss. This is in stark contrast to the situation where unexpected payments from customers would come in in December. To avoid this problem in the past, because there was no withholding option, I would stop sending invoices on about Nov 15th to push the income into the following year.
 
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Thread Starter

killivolt

Joined Jan 10, 2010
800
This is in start contrast to the situation where unexpected payments from customers would come in in December. To avoid this problem in the past, because there was no withholding option, I would stop sending Invoices about Nov 15th to push the income into the following year.
I will remember this if I start another business.
kv
 
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