Let say i withdrew 6,000 from my retirement, but I choose to pay the taxes upfront instead of when taxes are done.
If you made non-deductible contributions other than Roth, you should have filed 8606. You can back file the form, usually with no penalty.
1099--R is the tax document you will get in January or February.
It shows any tax you had withheld.
When you take the withdrawal you don't pay the actual tax on it. You have taxes withheld like from your paycheck. The withholding is just an estimated amount. At the end of the year you will get a form 1099R to enter into your tax return. The withholding will be in box 4. On your tax return you enter the full amount as income. Then you get credit for the withholding on line 25b.
Than explain when i closed out one of my accounts.I had a check issued and the person on the phone asked me if I wanted to withhold anything for the irsthan?
Depending on circumstances, the fiduciary (manager of the account) may be required to withhold 20% or an elected amount of your choosing; like from your paycheck. It is a payment of tax to the IRS, your income tax form is a true-up/reconciliation of what happened during the year - all income, less deduction/adj(s) to figure tax liability then you get potential credits, including prepayments/withholdings to figure amount due/refund.
I should have them withhold something. Fidelity will let IRS know that a certain amount held right.
Yes you can have tax withholding taken out so you don't end up owing too much on your tax return next April. The full amount (before taxes) will add to all your other income and you will owe tax on the total of all your income. Then the taxes that were taken out are subtracted giving you a refund or tax due if you didn't take out enough.
That depends on a lot of things like how much you are taking out and how much is your total other income and any credits you get like the Child Tax Credit. But 10-20% is average. And don't forget your state too.
Always have to have their hand in the pot to take people money
Marginal tax rate x distribution.
Marginal tax rate is the rate at which next $ is taxed - your highest tax bracket b4 distribution, unless your distribution pushes you into next bracket.
@pennyapple853 When you take money out of retirement account, you are taking out money on which you did not previously pay any tax. So when you take it out, you have some tax withheld---just like when your employer paid you and took out money to withhold for the federal and state taxes. They will issue a 1099R to you in January or early February that shows how much you took out and how much tax you had withheld. You will enter that information when you prepare your tax return. The software will do the calculations and reconcile whether you had enough or too much withheld. Depending on the amount withheld plus your other income, you might owe more or you might get a refund.
@pennyapple853 The other information you have not mentioned here is how old you are. If you are taking money out of your retirement account before you are 59 1/2, then you are subject to a 10% early withdrawal penalty in addition to the ordinary income tax. Provide some details about your age and what kind of retirement account you are taking the money out of.
be aware that if you are under age 59 1/2, you will pay a 10% penalty for early withdrawal in addition to regular income tax. If you are married filing a joint return with a spouse and your income is less than $100,000, or if you are single And your income is less than $50,000, you will pay 12% federal tax +10% penalty, so you should estimate between 20% and 25% withholding. if your total income is higher than that, you are in the 22% tax bracket so you should estimate a 30% withholding. Most state is charge between five and 9% income tax, although some states have no income tax and some states can be as high as high as 14%. (The states do not charge extra for early withdrawal, only the federal taxes.)
Remember that if you have two little withheld, you will owe more when you file your tax return and if you have too much withheld, you will get the difference back as a refund.
Something else you should be aware of is that if you are closing your retirement account because you have terminated your employment and the account is too small for your employer to keep open, you have the option of rolling over the money into an IRA that you can set up with the stock broker of your choice, and keep the money tax-free and allow it to grow until you retire. Once you have the money in a private IRA you can invest it in any instrument of the IRA offers, including stocks, mutual funds, gold, or almost anything else. Roll overs are tax free as long as you have the rollover done directly between the old plan and the new plan.