Income change

[Robrad14]

My union pension went insolvent in 2016 they just passed the law in 2021 to help pensions that are insolvent the law provides for payback of any pension that was lost during the time from 2016 till now which means I should be getting a lump sum of 120,000 my question is how much tax do I need to pay on that lump sum

[AdamNe]

Hi @Robrad14  !

According to IRS Form W-4P, your plan is required to withhold 10% from any non-periodic payment, unless you fill out the form and request not to have taxes withheld. 

To determine if that 10% will be sufficient to cover your tax balance due at the end of the year, visit our TaxCaster and enter all your sources of income and other withholding or tax payments. If you deem it necessary to ask the plan to withhold more taxes, you may submit a Form W-4P before they process the lump sum payment and enter an additional amount to be withheld on Line 3 (Line 2 is not applicable to non-periodic payments). Be sure to fill out another form after that if you want your withholding to go back to normal. 

[JandKit]

Hi, I was bested on this reply but more is less!

As with any tax return, There is needed information such as your filing status, the type of deductions and credits you may have, etc. That being said, The amount of taxes can be calculated with a program called TaxCaster. I have provided the link here: https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

This is an income tax calculator for 2020 but can be used for estimating the 2021 taxes. This program will ask the questions necessary to complete an estimate that will be helpful in your planning. As always, when given the option to withhold taxes, do so for both federal and state if necessary.