Tax question

L1: Tax questionSuppose a 55 year old individuals sole income is the $36K he recieves from his IRA via the 72(t) clause. Would the entire $36K be taxable or would this individual enjoy the same standard deductions that everyone receives when married and filing jointly? Again, the only income this individual and his wife would be claiming would be the $36K he was receiving from “substantially equal periodic payments.” 2008-08-13 13:34, By: Reg, IP: [98.214.67.158]
L2: Tax questionYes it is taxable and yes youmost probably getat least the standard deduction. 2008-08-13 13:45, By: gfw, IP: [98.214.67.158]

L2: Tax questionReg:
Assuming the IRA is a traditional IRA, and assuming all contributions were pre-tax contributions, then all distributions would be taxable as “Ordinary Income” and reported on Line 15 a/b of Form 1040. Of course you would complete the rest of the tax return to determine the final tax liability.
If the IRA contains both pre-tax and after-tax contributions, then the IRA has “basis” and must be accounted for using IRS Form 8606. In this case a percentage of the distributions will be tax free.
Jim2008-08-13 13:50, By: Jim, IP: [70.167.81.119]

L2: Tax questionNot exactly. The $ 36,000 would beincluded in taxable income. Then this would be reduced by the Standard Deduction of $ 10,900 for 2008 on a joint tax return, as well as reduced by $ 7,000 for the 2 Personal Exemptions@ $ 3,500. So, only $ 18,100 of the $ 36,000 is actually taxed.
Of that amount, the first $ 16,050 is taxed at 10%, or a total of $1,605 and the remaining $ 2,050 is taxed at 15% which is $ 307.50. Therefore, the total federal income tax would be $ 1,912.50 on the $ 36,000 of SEPP 72-T distributions. In PA there would be no state income tax because while retirement benefits after 59 1/2 are not taxable, those before 59 1/2 are only taxed after the initial contributions have been recovered tax-free.

In addition, if you did not get any or all ofthe $ 1,200 in Stimulus Payments based upon your 2007 joint tax return, then the balance will be allowed as a TAX CREDIT against your 2008 income tax ( after completing a new 29-line complex worksheet).2008-08-13 13:58, By: dlzallestaxes, IP: [96.245.168.21]

L2: Tax question”Therefore the total federal income tax would be $1,912.50…”
Thank you for your very informative reply. One more question: When I informerd the lady who prepares my taxes of my plans regarding my 72(t) SEPP, she suggested that I make quarterly payments of $900 to the IRS, which I have done for Q1 and Q2. But obviously I”m sending the IRS far too much. So, can I merely reduce my payments to the IRS for Q3 and Q4 without causing any problems with Uncle Sam?2008-08-14 07:20, By: Reg, IP: [98.214.67.158]

L2: Tax questionYES. Just send them $ 200 on 9/15/08 or 1/15/09, or $ 100 each time. Of course, this assumes that you had no other income in 2008, and that you took the full year”s $ 36,000 even though you started some time during the year. If you started during 2008, and are taking periodic payments, then you will have less than $ 36,000 included for 2008.
Further, your tax lady may have been estimating what your total tax bill will be including other income, and wanted to ease the burden if you did not file estimates and waited until next April when the tax return is due. However, if you, and/or your spouse, were employed during the year, and have now started a SEPP 72-T, then you have to estimate your taxes based upon all income. Also, no estimated taxes are due if your total withholdings and prior estimated payments are $1 more than last year”s total taxes.
If your tax lady didn”t explain all of this to you, change tax preparers !!!!2008-08-14 07:34, By: dlzallestaxes, IP: [96.245.168.21]