Welcome to Law-Forums.org!   

Advertisments:




Sponsor Links:

Discount Legal Forms
Discounted Legal Texts


Lines 12a And 12b

Corporate Law Discussions

Lines 12a And 12b

Postby Calvino » Tue Dec 13, 2016 11:35 am

s About Taxes)/Lines 12A and 12B Advertisement Expert: Vanessa D. Powell, CPA - 10/14/2009 Hello Ms. Powell, I had my taxes professionally prepared last year. I do not understand why both my wife's and my pension were reduced from 18,000 to 4,000 on lines 12A to 12B on Form 1040A. Is this a normal reduction allowance? Is it because we both paid into our pensions while working? Or is it because I retired under a disability retirement before the normal regular age last year? If so, and I am now at the normal allowable age this year, will that allowance no longer be credited this year or in future years?

Also, if I work part time this year and get paid on a form 1099, when I send in a quarterly payment on a 1040-ES to the IRS, does the IRS notify and pay my social security taxes so that I will earn my needed quarters or credits?

Thanks so much for your help! Bill.

ANSWER: Hi Bill-

To answer your second question first, your quarterly tax estimate will include an amount for social security tax(if you've estimated properly- or if whoever prepares your taxes does.#  If you work and get paid as an independent contractor #via form 1099), you'll have to pay self-employment tax, which basically includes both you and the "employer" portion of social security and medicare taxes.

Now for your first question- you can figure this out yourself pretty easily.  Look at you and your wife's 1099-Rs.  There is a box that will tell you what kind of distribution they are.  My suspicion is that your wife's distribution is taxable, and yours isn't if you retired and received your distribution due to disability.  Check your 1099-R.  If the box listing taxable benefits is less than the total distribution(or zero) than it's your benefits that aren't taxable, and you can then look on the back of the 1099-R for the distribution code(or check the irs website if there is no back.)  Same goes for your wife if this isn't the case.

If it still doesn't make sense, let me know the amounts in the boxes and I'll go through it with you.

Hope that helps!

---------- FOLLOW-UP ----------

Hi, Ms. Powell, thanks for being so generous with your time and expertise. My 1099R is OPM as I retired under Civil Service. It was a disability pension granted May 08 when I was 54 years old. Box 1 gross is 14000 box 2a taxable states unknown box 7 is code 3 disability. So my questions are the same really:

Is it nontaxable because I retired under a disability retirement before the normal regular age last year(55 years with 30 service which I have now)? If so, and I am now at the normal allowable age this year, will that become a taxable amount this year and in future years?

Is it because I paid 65000 into CSRS and it is not taxable until I collect more than that amount?

Will it always be tax free and why did OPM state unknown on my 1099R?

This is so confusing to me. I just want to be sure to pay taxes quarterly if necessary so not to be penalized.

Thanks again! Bill.
Calvino
 
Posts: 35
Joined: Fri Feb 21, 2014 7:30 am

Lines 12a And 12b

Postby Venjamin » Tue Dec 13, 2016 5:57 pm

s About Taxes)/Lines 12A and 12B Advertisement Expert: Vanessa D. Powell, CPA - 10/14/2009 Hello Ms. Powell, I had my taxes professionally prepared last year. I do not understand why both my wife's and my pension were reduced from 18,000 to 4,000 on lines 12A to 12B on Form 1040A. Is this a normal reduction allowance? Is it because we both paid into our pensions while working? Or is it because I retired under a disability retirement before the normal regular age last year? If so, and I am now at the normal allowable age this year, will that allowance no longer be credited this year or in future years?

Also, if I work part time this year and get paid on a form 1099, when I send in a quarterly payment on a 1040-ES to the IRS, does the IRS notify and pay my social security taxes so that I will earn my needed quarters or credits?

Thanks so much for your help! Bill.

ANSWER: Hi Bill-

To answer your second question first, your quarterly tax estimate will include an amount for social security tax(if you've estimated properly- or if whoever prepares your taxes does.#  If you work and get paid as an independent contractor #via form 1099), you'll have to pay self-employment tax, which basically includes both you and the "employer" portion of social security and medicare taxes.

Now for your first question- you can figure this out yourself pretty easily.  Look at you and your wife's 1099-Rs.  There is a box that will tell you what kind of distribution they are.  My suspicion is that your wife's distribution is taxable, and yours isn't if you retired and received your distribution due to disability.  Check your 1099-R.  If the box listing taxable benefits is less than the total distribution(or zero) than it's your benefits that aren't taxable, and you can then look on the back of the 1099-R for the distribution code(or check the irs website if there is no back.)  Same goes for your wife if this isn't the case.

If it still doesn't make sense, let me know the amounts in the boxes and I'll go through it with you.

Hope that helps!

---------- FOLLOW-UP ----------

Hi, Ms. Powell, thanks for being so generous with your time and expertise. My 1099R is OPM as I retired under Civil Service. It was a disability pension granted May 08 when I was 54 years old. Box 1 gross is 14000 box 2a taxable states unknown box 7 is code 3 disability. So my questions are the same really:

Is it nontaxable because I retired under a disability retirement before the normal regular age last year(55 years with 30 service which I have now)? If so, and I am now at the normal allowable age this year, will that become a taxable amount this year and in future years?

Is it because I paid 65000 into CSRS and it is not taxable until I collect more than that amount?

Will it always be tax free and why did OPM state unknown on my 1099R?

This is so confusing to me. I just want to be sure to pay taxes quarterly if necessary so not to be penalized.

Thanks again! Bill.
Venjamin
 
Posts: 52
Joined: Thu Jan 09, 2014 3:57 am

Lines 12a And 12b

Postby Amblaoibh » Fri Dec 23, 2016 2:38 am

Hm.  Tough to say.  That wonderful "taxable amount unknown", with regards to civil service retirement is complicated, I'm sorry to say.  Here's a blurb from a forum for federal employees by someone receiving distributions annually from an annuity: "the 1099 only shows contributions and does not show what is non-taxable, that is to be worked out by the annuitant by using the Simplified Rule. What is taxable or non-taxable is going to depend as to whether or not you have used your retirement contributions... and those retirement contributions are used in about 2.5  years based on what payments you are receiving from OPM. The non-taxable amount of that annual annuity takes years to come up to the amount of contributions you made to the retirement system and you have to compute that amount every year. There is a form in the OPM web-site under Simplified Formula that lets you calculate what part of your annuity is tax free and when you retire the booklet that OPM gives you tells you how much is tax free but it also gives a lot of information on this issue. In my case with $44000 in annuity benefits a year only $3600 is not taxable and it stays that way until the $94000 is used up and then all of my annuity becomes taxable."

It's similar for teachers- they have to calculate the taxable portion of their annuities every year(and it's kind of a pain.)

Here- I found the perfect tool for you:  http://apps.opm.gov/tax_calc/index.cfm

It will help you calculate the taxable portion.  If your tax preparer didn't know this or even bother to look it up, CHANGE.  You don't need to get penalized for someone else not knowing what they're doing.

Best of luck, Bill!
Amblaoibh
 
Posts: 38
Joined: Sun Jan 12, 2014 9:09 pm


Return to Corporate Law

 


  • Related topics
    Replies
    Views
    Last post