If I’m 57, retired, and withdraw $9600 ($1600 Fed

Forum|Forum|4 years ago
February 6, 2022
9 replies
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TurboTax Deluxe Online

Best answer by VolvoGirl

I’m a little confused…recap:

withdrew = $9600

taxes = $1600 fed $400 state

received $8000 for life insurance payment

So why do I owe on the $1600 in withholding? It seems like I’m paying taxes on the taxes.

No, you actually took out 9,600. But you only put 8,000 into the life insurance. So you owe tax and the IRS 10% early withdrawal penalty on the 1,600 you didn't put in the life ins. But your numbers don't add up. What about the 400 for state? Was federal only 1200 or did you only get 7,600?

Or actually you owe tax on the whole 9,600 + the 10% penalty. Don't know if buying life insurance is a rollover. And as mentioned above the penalty free withdrawal was only from the company. Not penalty free for taxes and the IRS. The tax taken out is just withholding like from paychecks, not the actual tax. It is just an estimated amount to cover the tax that will be due on your tax return.

HelenC12

Level 15

We'd love to help you complete your tax return, but need more information. Can you please clarify your question?

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retrn2edenAuthor

Level 2

Sure, I withdraw $9600 from an annuity with $1600 fed $400 state taxes withheld. The withdrawal also is one-penalty free each 12 months. The funds go right to paying a life insurance policy. I’m a little confused how it should be entered as Turbo Tax is saying I owe the 10% penalty on the $1600 which is the taxes withheld from the $9600.

VolvoGirl

Level 15

When you put it in the life insurance did you add back in the withholding from your own money? If not the withholding became a distribution itself and taxable and subject to the 10% Early Withdrawal Penalty.