Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Huge tax bill
Old 03-19-2018, 02:41 PM   #1
Dryer sheet wannabe
 
Join Date: Sep 2015
Location: Dublin
Posts: 16
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.
__________________

Chief322 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-19-2018, 02:55 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jul 2007
Posts: 1,038
How big?
__________________

FANOFJESUS is offline   Reply With Quote
Old 03-19-2018, 02:56 PM   #3
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 44,168
Quote:
Originally Posted by Chief322 View Post
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.
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

Charter resident of the lumpen slums of cyberspace

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 03-19-2018, 03:01 PM   #4
Dryer sheet wannabe
 
Join Date: Sep 2015
Location: Dublin
Posts: 16
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.
Chief322 is offline   Reply With Quote
Old 03-19-2018, 03:02 PM   #5
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 44,168
Quote:
Originally Posted by Chief322 View Post
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.
That would be penalty enough for me!
__________________
Numbers is hard

Charter resident of the lumpen slums of cyberspace

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 03-19-2018, 03:02 PM   #6
Dryer sheet wannabe
 
Join Date: Sep 2015
Location: Dublin
Posts: 16
Roughly $18,000
Chief322 is offline   Reply With Quote
Old 03-19-2018, 03:05 PM   #7
Thinks s/he gets paid by the post
 
Join Date: Mar 2015
Posts: 1,517
Quote:
Originally Posted by Chief322 View Post
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.
So in retrospect, which toys would you have foregone in order not to make this mistake?
__________________
Old enough to know better.
joeea is offline   Reply With Quote
Old 03-19-2018, 03:08 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 18,988
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...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 03-19-2018, 03:37 PM   #9
Full time employment: Posting here.
VanWinkle's Avatar
 
Join Date: Oct 2017
Location: Brighton
Posts: 621
Quote:
Originally Posted by pb4uski View Post
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.
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.
VanWinkle is offline   Reply With Quote
Old 03-19-2018, 03:50 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 18,988
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...60/35/5 AA
pb4uski is offline   Reply With Quote
Old 03-19-2018, 03:58 PM   #11
Thinks s/he gets paid by the post
RobbieB's Avatar
 
Join Date: Mar 2016
Location: Central CA
Posts: 3,419
I owe 14 grand. Six and a half to the Feds and seven and a half to CA.
__________________
Retired at 59 in 2014. Should have done it sooner but I worried too much.
RobbieB is offline   Reply With Quote
Old 03-19-2018, 04:04 PM   #12
Full time employment: Posting here.
VanWinkle's Avatar
 
Join Date: Oct 2017
Location: Brighton
Posts: 621
Quote:
Originally Posted by RobbieB View Post
I owe 14 grand. Six and a half to the Feds and seven and a half to CA.
__________________
Retired May 13th(Friday) 2016 at age 61.
VanWinkle is offline   Reply With Quote
Old 03-19-2018, 04:07 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 1,969
much less tax if you pull the toy money from taxable or roth accounts.
bingybear is offline   Reply With Quote
Old 03-19-2018, 05:14 PM   #14
Full time employment: Posting here.
 
Join Date: Feb 2007
Posts: 595
Quote:
Originally Posted by Chief322 View Post
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.
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?
copyright1997reloaded is offline   Reply With Quote
Old 03-19-2018, 05:44 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 19,067
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.
audreyh1 is offline   Reply With Quote
Old 03-19-2018, 05:51 PM   #16
Full time employment: Posting here.
 
Join Date: Oct 2013
Location: Ojochal
Posts: 701
Quote:
Originally Posted by RobbieB View Post
I owe 14 grand. Six and a half to the Feds and seven and a half to CA.
That's one way to Blow More Dough!
__________________
“Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did. So, throw off the bowlines, sail away from the safe harbor. Catch the trade winds in your sail. Explore. Dream. Discover.”

Mark Twain
candrew is offline   Reply With Quote
Old 03-19-2018, 06:30 PM   #17
Dryer sheet aficionado
 
Join Date: Dec 2017
Location: Wayside (rural) NY
Posts: 44
Quote:
Originally Posted by Chief322 View Post
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.
Be glad: The market is up. Just think how painful the experience would have been if the market was down!
SnowBound is offline   Reply With Quote
Old 03-19-2018, 06:46 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Jul 2007
Posts: 1,038
I thought I got hit hard at 3k
FANOFJESUS is offline   Reply With Quote
Old 03-19-2018, 06:57 PM   #19
Thinks s/he gets paid by the post
JPatrick's Avatar
 
Join Date: Jun 2005
Posts: 2,533
Quote:
Originally Posted by copyright1997reloaded View Post
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?
I have several of those monster cap gains stocks, and I've pretty well decided they are going into the will.
JPatrick is offline   Reply With Quote
Old 03-19-2018, 07:09 PM   #20
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,232
Quote:
Originally Posted by JPatrick View Post
I have several of those monster cap gains stocks, and I've pretty well decided they are going into the will.
My plan too but sometimes the plans get upset by a taxable spinoff/merger that derails the plan.
__________________

kaneohe is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Employer converting employees to self-employed and huge tax hit soupcxan FIRE and Money 105 01-02-2017 04:59 PM
Huge tax bill -- I think I'm screwed dwk FIRE and Money 5 04-01-2010 06:58 AM
Wharton: "Giving Employees What They Want: The Returns Are Huge " Nords Young Dreamers 8 01-02-2006 03:12 PM
THE COMING HUGE DEPRESSION anthony FIRE and Money 15 12-12-2005 12:53 PM

» Quick Links

 
All times are GMT -6. The time now is 02:03 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.