Upcoming tax time.....?

Question

I bought a home in Wyoming in August, then left my job in California (never owned a home in California) and moved to Wyoming. I also took the lump sum on my 401K, but did pay 7% in taxes on the lump sum distribution. I am now working out here. I realize my taxes are going to be a mess, anything special Ishould know -extra deductions, special taxes?

Answer 1

If they only withheld 7% on the 401K distribution, that won't come close to covering it. Usually they withhold 20%, and often that isn't even enough. You'll owe income tax on it at whatever your tax rate is, plus a 10% penalty for early withdrawal if you are under age 59-1/2.

Answer 2

If you are working in Wyoming and expect to work 39 weeks out of the first year you are there, you would be eligible to deduct moving expenses.

Since you bought the house in August, you may or may not see a difference in tax this year. The interest you paid and the property taxes you paid may not be enough for you to itemize instead of taking the standard deduction (which you automatically get anyway).

The 401K distribution is hideous. Most of us on the board would have encouraged you to roll it to an IRA within 60 days. At a minimum, it's taxable income to you (unless you actually put any post-tax money in which is very, very rare) and will probably push you to a higher tax bracket.

Eg, without the 401K, you might have been in the 15% bracket. With the 401K money, you may find some of the additional income taxed at 25% rather than all at 15%. You may also owe a penalty (see form 5329) of 10%

Answer 3

Of course all this will be moot when the FairTax Act H.R. 25 passes and replaces all income taxes with a single sales tax on new items. The FairTax now has the support of hundreds of thousands, 72 congressional sponsors / co-sponsors, and 7 presidential candidates. See www.fairtax.org
Fundamentals and facts http://www.fairtax.org/PDF/FairTax-Funda...
Frequently Asked Questions about the FairTax http://www.fairtax.org/fairtax/faqs.htm

Answer 4

too late for this year probably, but if you list yourself as single with no dependents, then you will have much more tax deducted from your paycheck.