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Thread: Taxes in Retirement

  1. #1

    Default Taxes in Retirement

    Tis the season... well almost.

    This article does not directly allude to the Thrift Savings Plan but much is the same. I figured I'd share to warm up our brains on upcoming tax season and planning our tax strategies for next year. And honestly, who doesn't love reading about taxes?

    The unpleasant surprise waiting for you when you retire? Taxes
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    Disclaimer: This is not advice or a recommendation.


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  3. #2

    Join Date
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    Default Re: Taxes in Retirement

    I'm not sure this is the correct thread for this but people will see it. Call it a tip or a warning. If you start a TSP withdrawal or SS payments later in the year, you automatically will have no fed tax withholding for that year. You can force some withholding at the time but I did not. I knew I would owe the IRS this year but failed to realize how fast it adds up and that of course IRS would charge a penalty for underpayment of taxes. $118 in my case.

    PO

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  5. #3

    Default Re: Taxes in Retirement

    PO, you can try writing a letter to get the underpayment penalty waived. Explain why it happened and that you have corrected your withholding so that it won't happen again this year. Works a pretty high percentage of the time. Good luck!

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  7. #4

    Join Date
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    Default Re: Taxes in Retirement

    Working on it. Just wanted to let everyone know how fast taxes add up. Of course if I was in the 12% bracket it would be less but then I wouldn't be so fortunate would I?

    PO

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  9. #5

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    Default Re: Taxes in Retirement

    Quote Originally Posted by Scout333 View Post
    PO, you can try writing a letter to get the underpayment penalty waived. Explain why it happened and that you have corrected your withholding so that it won't happen again this year. Works a pretty high percentage of the time. Good luck!
    Went through the form 2210 worksheet and checked the box about when withholding was with held. Worth a shot as the lump sum leave payment in January had a healthy chunk of withholding. Reduced the penalty by a whole $36. I am not sure the letter and delay would be worth $82. I will sleep on it for a while. Taxes are not due for almost two months so no particular hurry. I have not yet corrected the withholding, trying to figure out which payment or payments to do it with. I am so lucky to have so many sources of income in retirement.

    Once again a reminder to all, that withholding amount is important on any income received. It adds up real quick.

    PO

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  11. #6

    Default Re: Taxes in Retirement

    Quote Originally Posted by PessOptimist View Post
    Went through the form 2210 worksheet and checked the box about when withholding was with held. Worth a shot as the lump sum leave payment in January had a healthy chunk of withholding. Reduced the penalty by a whole $36. I am not sure the letter and delay would be worth $82. I will sleep on it for a while. Taxes are not due for almost two months so no particular hurry. I have not yet corrected the withholding, trying to figure out which payment or payments to do it with. I am so lucky to have so many sources of income in retirement.

    Once again a reminder to all, that withholding amount is important on any income received. It adds up real quick.

    PO
    PO, It has been awhile since I looked at the Form 2210 but it is fairly quirky and worth checking the exceptions. For example, if you paid in at least as much as you paid in the prior year you can sometimes avoid the penalty entirely. it also allows any W-2 withholdings to be treated as if they were paid equally throughout the calendar year it applies to. i.e. 2019 calendar year instead of the actual pay date it was withheld on. This sometimes can reduce the penalty amount. Sounds like you may already have tried the exceptions but it is definitely worth looking at them. Best of luck!

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