Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
gjgogol
Level 2

tax implications of receiving a large check

I retired in January 2019 as a federal civil servant.  I was able to cash in on my accumulated annual leave/vacation time which resulted in a fairly large check. I also stated receiving monthly pension checks as a result of my retirement. Taxes were taken out of my large check but apparently not enough because after inputting all my data into TT, it turns out that I now owe and substantial amount of federal taxes, i.e. over $16K.  Can this be possible? It appears that U.S. Government as well as TT treated the large check I received as regular income as the amount of the check was reported in a W-2 form. Can this be possible?  Does this sound correct?  Is there anything I can do to lower this tax burden at this point? According to TT it does not qualify for IRA deduction as the amount of "income" was over the threshold amount.

3 Replies
ColeenD3
Employee Tax Expert

tax implications of receiving a large check

Compensation for unused vacation days is considered wages subject to withholding. If you can't pay the tax by July 15, you can get on an installment agreement.

 

The best thing you can do is pay it before July 15 this year. If you can't you can fill out Form 9465 Installment Agreement Request. You will be liable for penalties and interest.

Understand your agreement & avoid default

  • Your future refunds will be applied to your tax debt until it is paid in full;
  • Pay at least your minimum monthly payment when it's due;
  • Include your name, address, SSN, daytime phone number, tax year and return type on your payment;
  • File all required tax returns on time & pay all taxes in-full and on time (contact us to change your existing agreement if you cannot);
  • Make all scheduled payments even if we apply your refund to your account balance; and
  • Ensure your statement is sent to the correct address, contact us if you move or complete and mail Form 8822, Change of Address (PDF).

For complete information, see Installment

 

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
gjgogol
Level 2

tax implications of receiving a large check

thank you.  is there anything I can do at this point to reduce these owed taxes?  Does income averaging still exist?  my income increased significantly because of this payout. my income next year will go down significantly.

DaveF1006
Employee Tax Expert

tax implications of receiving a large check

You can only income average if you have a business that fluctuates in income such as a retailer that experiences spikes in income during holiday or special days event like Valentines day or Halloween. 

 

At this point, when you finish your return, it will ask you if you wish to do an installment loan agreement for the unpaid taxes. You might consider this alternative. To quickly access this agreement.  Here is some information.

  1. If you haven't filed yet, step through the File section of TurboTax until you reach the screen How do you want to pay your federal taxes? Select the installment payment plan option, Continue, and follow the onscreen instructions.
  2. If you already filed, or you're unable to find this option in TurboTax, you can apply for a payment plan at the IRS Payment Plans and Installment Agreements webpage (make sure you've filed your return before applying through their site). 
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Dynamic AdsDynamic Ads
Privacy Settings
v