I recently cashed in on my retirement plan. What percentage of that sum should I save to pay taxes on at the end of the year (I didn't ask them to withhold it)? I live in PA.
2007-09-20 04:17:21 · 6 answers · asked by Joanne 3 in Business & Finance ➔ Taxes ➔ United States
The percentage depends on how much was withdrawn, how old you are, your filing status, and your other income.
Add the total distribution to your other income to figure your tax bracket. Let's assume you will be in the 25% tax bracket. Then a maximum of 25% of your distribution will go to income taxes.
If you are taking an early distribution (before age 59.5) and do not qualify for an exception (such as disability), then there will be a penalty tax of 10% in addition to income tax.
In the example I have given, 35% of your distribution will go to federal income taxes. PA will also tax your distribution if it is an early distribution. So add 3% for that. Total close to 40%.
2007-09-20 06:12:11 · answer #1 · answered by ninasgramma 7 · 0⤊ 1⤋
If you just cashed the account, you should go ahead and make a quarterly estimate, and send the taxes in (both Federal and State).
If it is a qualified withdrawal (you are age 591/2 or over) then you need only estimate the taxes on what you withdrew. To do that, you need to determine your existing tax bracket. Go back to last years tax rates, try to estimate what this years total income is going to be, then look up that number on the chart. Determine what the % of the income is. Then apply that % to the amount you withdrew, and send it in.
The Federal government only requires that you withhold at least what your taxes were last year, through payroll withholding, and quarterly estimates. You can pay any amounts due on $/15, without interest or penalty, if you have made the threshold. States however, can be very harsh. Check with Pa tax dept.
2007-09-20 04:26:33 · answer #2 · answered by patrick 6 · 0⤊ 0⤋
You'll owe federal income tax at whatever your rate is. That can vary from 10% to 35% but is probably 15% or 25%. If you are under 59-1/2 and it's a traditional IRA or a 401K, you'll owe an additional 10% penalty.
PA doesn't tax pensions, so you're OK at the state level.
2007-09-20 05:25:43 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
You should put at least 45 - 50% away. If you are younger than 59 1/2, you will owe a 10% penalty. The rest will be taxed at your nominal tax rate, whether that is 15% or 25%, depends on your circumstances. Then you will also own state income taxes.
2007-09-20 04:24:54 · answer #4 · answered by bkwrm006 2 · 3⤊ 0⤋
Depends on the rest of your income. If you are under 59 1/2 though, on top of federal taxes and state taxes you'll have to pay 10% early distribution penalty if you don't meet certain exceptions.
2007-09-20 04:35:22 · answer #5 · answered by Anonymous · 0⤊ 0⤋
I hope you didn't "cash in" the qualified retirement plan. I hope you rolled it to an IRA.
2007-09-20 05:27:17 · answer #6 · answered by r_kav 4 · 0⤊ 0⤋