Florida DROP Program

Forum|Forum|4 years ago
July 28, 2021
2 replies
4 views

I will complete the FRS DROP Program in November and will have to receive a cash distribution that may affect my taxes for the year. Can you estimate how much my taxes will be based on my salary or past income tax returns?

Thank you,

KochuK

Level 7

Hi Bandrews59, thank you for joining the "Ask the Experts: Moving" special forum today.

Congrats on the completion of FRS DROP program.

We do not have your salary or past income tax information for this special forum nor can we do financial projection for you.

I recommend that you establish a "test user ID" (to be different from the real user ID for previous tax filings), and use TurboTax Online 2020 program to simulate 2021tax result. Cash distribution from the DROP program should be entered via Form 1099-R data entry point.

TurboTax also has an Income Tax Calculator that you can use for estimate purpose.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

Hope this helps. Have a great day!

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Anonymous

Hello Bandrews59,

Congratulations on your upcoming (actual) retirement! The quickest and simplest way to estimate your 2021 taxes would be to take your effective tax rate from 2020 and multiply it by all your income (salary, DROP payout, any vacation payout, etc.). Your effective tax rate is the total calculated tax (line 16) divided by taxable income (line 15).

However, that is assuming the same or similar numbers and circumstances as 2020. Because you are receiving a DROP distribution, that will change things where you might be better off using your marginal tax rate. To do that, take your taxable income from last year and add it to the extra income you will receive this year (DROP Payout, any vacation payout, etc.) and then see where the total falls in this table. Then, multiply the additional income you will receive by that tax rate you just determined.

For example, if you are filing MFJ and had taxable income of $50k last year and receiving $50k in DROP, then the $100k total falls in the 24% tax bracket. Multiply that 24% by $50k (the additional amount) to estimate how much you bill be paying Uncle Sam on the additional DROP. You should then add that amount to how much you paid last year to get the total taxes you may potentionally be paying this year.

If you really want to spend a lot of time on this, you can visit the TurboTax free tax calculator by visiting this link

I hopt that helps.