About 401k & ira withdrawls

[COZICAN]

Regarding ACA income.....If I want systematic deposits of $4000 from my 401K or IRA and taxes are withheld.......is my income $4000 or is my income $4000 + taxes?

Coz

 

[Dtail]

Regarding ACA income.....If I want systematic deposits of $4000 from my 401K or IRA and taxes are withheld.......is my income $4000 or is my income $4000 + taxes?

Coz

It is just the $4,000.
See the below reference for a good summary of MAGI.
http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

 

[cathy63]

Regarding ACA income.....If I want systematic deposits of $4000 from my 401K or IRA and taxes are withheld.......is my income $4000 or is my income $4000 + taxes?

Coz

Your income is the full amount that was removed from your 401K or IRA. If you want to receive $4000 so you have $4500 removed from your 401K because you know the administrator will withhold $500 for taxes, then the full $4500 is income. It's the same as if you received the full $4500 and then you sent $500 of it to the IRS. Every penny that comes out of your 401k is income regardless of whether it ever ends up in your account or goes directly to the IRS.

 

[Breedlove]

But , if you withdraw and the institution Fidelity takes taxes out . Do you pay taxes again at the end of the year with 4000 plus SS /

 

[Badger]

But , if you withdraw and the institution Fidelity takes taxes out . Do you pay taxes again at the end of the year with 4000 plus SS /

You might. It depends on your total income and how the withdraw affects your tax bracket. Think of it as earned income.


Cheers!

 

[beowulf]

It’s the same as having money withheld from a paycheck. If you make $50K a year and have $5K withheld for taxes, your tax bill is on the $50K. But you may not owe anything if the $5K covers your tax bill.

 

[Dtail]

But , if you withdraw and the institution Fidelity takes taxes out . Do you pay taxes again at the end of the year with 4000 plus SS /

Could be semantics here. If you withdraw 4k and Fidelity withholds taxes of 500, your taxable income is 4k, not 3,500 or 4,500.
Your ultimate taxes owed is netted down against the 500 already withheld.

If the OP wishes for a NET 4k and 500 is withheld for taxes, then he must withdraw 4,500 and will be taxed on 4,500.

 

[beowulf]

+1

 

[COZICAN]

"If the OP wishes for a NET 4k and 500 is withheld for taxes, then he must withdraw 4,500 and will be taxed on 4,500"

This is what I assume is correct. Thanks all! I will check with my tax advisor/CPA before setting up withdrawls.

Coz

 

[golfnut]

Note the following.



The IRS requires plan administrators to withhold 20% from 401k distributions. You can bypass the 20% withholding by doing a trustee-to-trustee transfer (rollover) to an IRA. IRA's are not subject to the mandatory 20% withholding.

 

[beowulf]

There are several ways to avoid the 20% federal withholding. First and foremost, it doesn’t apply to RMDs. It also doesn’t apply if you are over 59 1/2 and are taking equal monthly withdrawals. You can have withholding, but it’s not mandatory. Other ways are a bit more complex, which is why it’s generally a good idea to roll your 401K to an IRA once you fully retire, unless you have a fantastic 401K. Also, for RMDs, you have to calculate the amount necessary to withdraw for IRAs and 401Ks separately. You can combine all the IRAs and take your RMD from any single one or all of them. But each 401K is treated as an independent account. Makes life more complex.

 

[COZICAN]

There are several ways to avoid the 20% federal withholding. First and foremost, it doesn’t apply to RMDs. It also doesn’t apply if you are over 59 1/2 and are taking equal monthly withdrawals. You can have withholding, but it’s not mandatory. Other ways are a bit more complex, which is why it’s generally a good idea to roll your 401K to an IRA once you fully retire, unless you have a fantastic 401K. Also, for RMDs, you have to calculate the amount necessary to withdraw for IRAs and 401Ks separately. You can combine all the IRAs and take your RMD from any single one or all of them. But each 401K is treated as an independent account. Makes life more complex.

Good info. Thank you for taking the time to reply.

Coz