L1: TaxesI feel like I have a pretty good understanding of the 72t rules, and how people use this to retire early, or go into something else. My big question is taxes. I’m assuming that you have to pay taxes in the year the distributions are made, so how do you figure up how much you owe? Are you just paying estimated taxes through the IRS form 1040-es?2017-11-30 17:07, By: rigger5000, IP: [18.104.22.168]
L2: TaxesWhen I did my 72(t), I had the brokerage house take out 15% federal and my state taxes.2017-11-30 20:21, By: Red Baron, IP: [22.214.171.124]
L3: TaxesYou have to either have the taxes withheld when the distributions are made, or pay estimated taxes 4/15, 6/15, 9/15, and 1/15 of the following year. You should project your tax situation for the first year based upon the distributions taken (either prorated or full annual amount), plus the other taxable income that you expect to have.
Each year’s situation can be different depending upon changes in income in future years, and whether you took the full annual amount (which would be the same each year), or took less than the full amount. Also, you could have had wages or self-employment income in the first year, but not in future years, or less those years.
Your withholding rate or estimate % should be based upon the tax on the taxable income you project. If you just guess, or use what someone else tells you they did, you could end up with a big tax balance due when you file your tax returns. If you do your own tax returns, you will have to use the previous year’s tax program, and just set up a new tax return processing using your projected income and deductions (which might change if your situation changed), because the tax programs for the next year are usually not available until December. If you use a tax professional, they often have tax projection programs. HOWEVER, as of today no one knows what the tax laws will be for 2018.2017-12-01 01:58, By: dlzallestaxes, IP: [126.96.36.199]