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esbugsbunny
New Member

My Esop check was one amt with 20% withholding tax deducted 1099 r form shows total distribution before the 20% not check amt seems like I am paying taxes twice

 
1 Reply
TomYoung
Level 13

My Esop check was one amt with 20% withholding tax deducted 1099 r form shows total distribution before the 20% not check amt seems like I am paying taxes twice

No, you're not paying taxes twice.

If you've ever received a paycheck as an employee you received a "net check" with some amount of your gross pay withheld for taxes.  When you received your W-2 at year end Box 1 of your W-2 - "Wages, tips, other compensation" - showed the GROSS amount of all those paychecks and the taxes withheld were shown in the various "taxes withheld" boxes of the W-2.  You probably instinctively knew what happened when you entered your W-2: when you enter your Box 1 income your tax liability is calculated based on that income, and then you entered your withholding.  The amount you owed the IRS or the refund you were due from the IRS was the simple math of:

                            Tax liability based on taxable income - Taxes withheld = amount due or refund.

The 1099-R here is performing the exact same function as a year-end W-2.  It's simply reporting the GROSS income and any taxes withheld.   You're not paying taxes twice because the calculation is exactly the same as before:

                            Tax liability based on taxable income - Taxes withheld = amount due or refund.

Having taxes withheld is not the same as "paying your tax", it's simply a deposit, if you will, against the tax that finally gets calculated at year end after you total up all your income and deductions.

Tom Young



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