[USER]

Are there any tax consultants that could help ease my peace of mind? The company I work for had a pension for all employees but got rid of it years ago.

They have been sitting on the money until recently.

The letter I received stated that if the pension was under $7k that it would be cashed out. So here I am with a check in hand for $4,555. They took out Federal taxes only. I live in Oregon.

How much more am I going to be dinged on this money? I was hoping to get a tax return this year but now I feel like this screwed that up for me.

My husband and I both make $70k a year and have one child to claim and a house.

[Scott]

I wouldn’t spend money on a tax consultant. You’ll be dinged your state income tax rate. You’ll also probably get some of that money back when you file your taxes because they probably withheld 24% and when you get done doing your taxes I doubt you’ll be in the 24% tax bracket.

Lastly, the goal is not get money back. And keep more in every paycheck.

You may want to increase your withholding if you’ve been getting money back every year.

[Shawn]

Assuming this just happened your best option is to immediately deposit this into an IRA. You should also deposit the amount withheld for taxes.

Are you 59.5 years old?

[Robert]

I would get with a good tax accountant and have them game this out for you. While I am a genius in many ways; and I occasionally dazzle
myself with my own brilliance, when it comes to Mr.

Taxes; I turn all of that over to my tax accountant.

[Jill]

Rolling it into an IRA as mentioned in another comment may help prevent another tax hit but that happened to me with a severance pay.

I was taxed federally but not state and I ended up owing state taxes.

[Tristan]

What is the date on the check? Open a traditional IRA and deposit the money in it if it’s within 60 days and it should be tax free.

You’ll still get a tax for from the distribution, but then documentation that it was recontributed.

Just make sure it’s characterized as a 60 day rollover (provided it’s within 60 days)

[Sandy]

As long as it hasn’t been more than 60 days and you haven’t done another indirect rollover in the last 12 months then you can roll this to an Ira.

If you’re not comfortable doing this by yourself, then go to your bank and have them help you.

Your company withheld 20% in federal taxes so if you have the $1138 they withheld, add this to the Ira as well.

When it comes to taxes, You will add anything that isn’t put Into an Ira to your income for the year and pay federal and state ordinary income taxes along with penalty taxes.

[Valerie]

If you are under 59.5 it will be subject to your tax rate plus a 10% penalty, less whatever they withheld.

[Angela]

Run the numbers through TurboTax with and without the $4500. It’s free until you get to the end of the program. Pay when you actually file. Then you’ll know the amounts.

I doubt this money would send you into the next tax bracket. You just need to consider state income tax at Oregon rate.

The TT program will do it all for you.

This was money originally intended for your retirement so you’d serve yourself best to start a Roth IRA with it.

[Angela]

Deposit into an IRA. if it was this month that this happened, you won’t have a tax form until next year so deposit within 60 days and make a note on your calendar documenting what was done with the check.

[Author]

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