IRS and TX Teacher Retirement

Forum|Forum|5 years ago
October 16, 2020
2 replies
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I owed the irs $500 for a small business I run on the side. No a huge deal; $500.

then it came time for me put my texas teacher retirement system 1099 R form in the turbo tax program and I did and now i owe $5500. what gives?? It spit out to me that I don't pay any taxes on it, then I hit continue and it goes to owing $5500. It already took taxes out, but says I owe more. This is the first time this has happened to me.

Volleygal63

MWilka

Level 2

On the 1099 for your TX Teachers retirement, are the taxes withheld reflected on the 1099R? If so, make sure you entered the taxes withheld when you entered the 1099R form. If you have entered the 1099R income and the 1099R taxes withheld, and you still owe money, it is most likely correct.

To prevent this in the future, you will need to contact TX TRS and have your withholding changed on the your retirement income. Sometimes the amount withheld on retirement is not enough.

volleygal63Author

Level 2

Well TT told me the way I answered box 7 I don't have to pay any extra taxes. See pic. For grins; I completed my taxes, analyzed them and it came up with total tax $5011 then total payments/credits of $4409. Then it told me I have tax rate of 4.61% and that is up from last year of 3.06%. (is the rise in the tax rate higher this year?). thank you for taking the time to answer all my questions.

volleygal63Author

Level 2

So you ended up with a tax due of 5011-4409 = $602? That covers the 500 Self employment tax plus a little regular income tax on your total income. Where did the 5500 come from? You still don't owe the full tax. Only the amount after payments and credits.

Hi thank you for responding. Your answer made the most sense. I am a retired school teacher in TX. The way it TX Teacher Retirement works is if you serve 30 years + your age and it ='s to 80 then you can retire. There is no penalty for early distribution. So the other two answers did not make sense to me. TX Teachers are not on a normal pension plan like other pensions. It's based on age and years of service.

Part 2 is I do run a small business and it did say I owe $602 when I completed my business portion of my taxes. So that being all I owed, I was just gonna pay it and go on. (fyi; i am using turbo tax home and business and used if for the last 5-10 years).

Part 3 is when I put in my personal income from my 1099-R then it said I owed $5011 so that is where the extra amount owed came came from. But on the next screen it said based how you answered box 7 from your 1099-R, you don't have to pay any extra taxes. I answered in box 7 a #2. But the top of TT screen said I owed $50ll. So I freaked a little bec I didn't do anything different than what I did the last two years of retirement. And I got $3500 back in return. This year I owe the $602.

Part 4 so for grins I remembered the box said you don't pay any extra taxes on the amount so I completed my taxes to see what that meant and this is what I got. see the pic I included. Thanks for any help you can give me. Also are we paying a higher tax for 2019; because 2018 I paid 3.06% Thanks again!!

dmertz

Level 15

What TurboTax told you is that you don't pay extra taxes, i.e., an early distribution penalty (an excise tax) on the distribution. The distribution still adds to your taxable income on which you owe ordinary income tax. The amount of taxes withheld from the distribution does not take into account the actual marginal tax rate that can only be determined by preparing your tax return, so the default withholding was not sufficient to cover your marginal tax rate for this distribution. You own the additional amount of ordinary income tax with your tax return.