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03-19-2018, 02:41 PM
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#1
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Dryer sheet wannabe
Join Date: Sep 2015
Location: Dublin
Posts: 18
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Huge tax bill
Well I made a rookie mistake. After saving for such a long time wanted to reward ourselves with some toys. The market had been good so took money out of the retirement account to pay cash for the toys. Needless to say the 20% federal withholding didn't quite cover it. Don't have anymore toys on the list but will know better next time.
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03-19-2018, 02:55 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Jul 2007
Location: St. Louis
Posts: 1,563
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How big?
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03-19-2018, 02:56 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,000
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Quote:
Originally Posted by Chief322
Well I made a rookie mistake. After saving for such a long time wanted to reward ourselves with some toys. The market had been good so took money out of the retirement account to pay cash for the toys. Needless to say the 20% federal withholding didn't quite cover it. Don't have anymore toys on the list but will know better next time.
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Kudos for posting about your experience. Most would not have the courage to own up to how painful the tax bill can be for withdrawing from their IRA prior to 59.5.
Hopefully your experience will save others from suffering similar financial pain.
__________________
Numbers is hard
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03-19-2018, 03:01 PM
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#4
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Dryer sheet wannabe
Join Date: Sep 2015
Location: Dublin
Posts: 18
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It was not a penalty I can access my money whenever I want. The problem was between pension, wife's pay, my part time job and the withdrawals it put us into the 33% tax bracket.
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03-19-2018, 03:02 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,000
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Quote:
Originally Posted by Chief322
It was not a penalty I can access my money whenever I want. The problem was between pension, wife's pay, my part time job and the withdrawals it put us into the 33% tax bracket.
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That would be penalty enough for me!
__________________
Numbers is hard
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03-19-2018, 03:02 PM
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#6
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Dryer sheet wannabe
Join Date: Sep 2015
Location: Dublin
Posts: 18
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Roughly $18,000
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03-19-2018, 03:05 PM
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#7
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gone traveling
Join Date: Mar 2015
Posts: 3,508
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Quote:
Originally Posted by Chief322
Well I made a rookie mistake. After saving for such a long time wanted to reward ourselves with some toys. The market had been good so took money out of the retirement account to pay cash for the toys. Needless to say the 20% federal withholding didn't quite cover it. Don't have anymore toys on the list but will know better next time.
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So in retrospect, which toys would you have foregone in order not to make this mistake?
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03-19-2018, 03:08 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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I'm trying to make sense of the OP... even if one had ~$170k of all ordinary income then the tax would be less than 20% of income after deductions and exclusions (for a couple) .... unless the OP was in a high tax bracket to begin with before the withdrawals or was subject to 10% penalty. Must be some really nice toys.
But nonetheless a good lesson to do some rough calculations of taxes before doing large withdrawals.
ETA: I missed the post by the OP that they had other income that put them in the 33% bracket.... ouch! Lesson learned I guess.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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03-19-2018, 03:37 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Oct 2017
Location: Tellico Village
Posts: 2,596
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Quote:
Originally Posted by pb4uski
I'm trying to make sense of the OP... even if one had ~$170k of all ordinary income then the tax would be less than 20% of income after deductions and exclusions (for a couple) .... unless the OP was in a high tax bracket to begin with before the withdrawals or was subject to 10% penalty. Must be some really nice toys.
But nonetheless a good lesson to do some rough calculations of taxes before doing large withdrawals.
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Tax caster is your friend for determining how withdrawals will affect your tax brkt.
https://turbotax.intuit.com/tax-tool...ors/taxcaster/
I do taxes, and many people make the same mistake. In some cases, the withdrawal takes them over the ACA cliff and it really gets ugly.
Sorry it happened to the OP, but sounds like he learned a lesson from it.
__________________
Retired May 13th(Friday) 2016 at age 61.
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03-19-2018, 03:50 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Taxcaster is good, but the What-If worksheet in TT is good as well and allows easy comparison between different years or different scenarios.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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03-19-2018, 03:58 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2016
Posts: 8,968
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I owe 14 grand. Six and a half to the Feds and seven and a half to CA.
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03-19-2018, 04:04 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Oct 2017
Location: Tellico Village
Posts: 2,596
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__________________
Retired May 13th(Friday) 2016 at age 61.
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03-19-2018, 04:07 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Posts: 2,509
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much less tax if you pull the toy money from taxable or roth accounts.
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03-19-2018, 05:14 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Feb 2007
Location: Upstate
Posts: 2,944
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Quote:
Originally Posted by Chief322
Well I made a rookie mistake. After saving for such a long time wanted to reward ourselves with some toys. The market had been good so took money out of the retirement account to pay cash for the toys. Needless to say the 20% federal withholding didn't quite cover it. Don't have anymore toys on the list but will know better next time.
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OP, I will make you feel better (in terms of I feel your pain). I haven't done my 2017 taxes yet, but have a $149,000 capital gain from a single security. My largest holding was the subject of a mostly cash takeover. Think that's gonna hurt when I do my taxes?
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03-19-2018, 05:44 PM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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I am expecting a 6 figure tax bill. And maybe only 2/3 of it has been paid in estimated taxes.
So that's going to be a big hit come April.
But it's not a surprise. I deliberately sold some long-held assets last year.
__________________
Retired since summer 1999.
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03-19-2018, 05:51 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Oct 2013
Location: Cholula
Posts: 1,595
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Quote:
Originally Posted by RobbieB
I owe 14 grand. Six and a half to the Feds and seven and a half to CA.
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That's one way to Blow More Dough!
__________________
“Before you criticize someone, walk a mile in their shoes. That way, you’ll be a mile from them, and you’ll have their shoes.” – Jack Handey
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03-19-2018, 06:30 PM
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#17
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Recycles dryer sheets
Join Date: Dec 2017
Location: CarUpOnBlocks NY
Posts: 178
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Quote:
Originally Posted by Chief322
Well I made a rookie mistake. After saving for such a long time wanted to reward ourselves with some toys. The market had been good so took money out of the retirement account to pay cash for the toys. Needless to say the 20% federal withholding didn't quite cover it. Don't have anymore toys on the list but will know better next time.
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Be glad: The market is up. Just think how painful the experience would have been if the market was down!
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03-19-2018, 06:46 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Jul 2007
Location: St. Louis
Posts: 1,563
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I thought I got hit hard at 3k
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03-19-2018, 06:57 PM
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#19
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,610
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Quote:
Originally Posted by copyright1997reloaded
OP, I will make you feel better (in terms of I feel your pain). I haven't done my 2017 taxes yet, but have a $149,000 capital gain from a single security. My largest holding was the subject of a mostly cash takeover. Think that's gonna hurt when I do my taxes?
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I have several of those monster cap gains stocks, and I've pretty well decided they are going into the will.
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03-19-2018, 07:09 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 4,172
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Quote:
Originally Posted by JPatrick
I have several of those monster cap gains stocks, and I've pretty well decided they are going into the will.
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My plan too but sometimes the plans get upset by a taxable spinoff/merger that derails the plan.
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