Question

Charlie will retire this year. Next year he will receive social security benefits of approximately $18,000; 401(k) distribution of approximately $24,000 and his IRA RMD of approximately $9,000. He has not planned to have tax withheld on any payments, nor has he filled out anything to exempt his payments from tax. How much tax will be withheld from his payments?

	$0
	$900 with be withhold from his IRA.
	$1,250 will be withheld from social security.
	$4,800 will be withheld from his 401(k).

Answer 1

Taxability of social security benefits depends on MAGI i.e Modified Adjusted Gross Income which is the sum of all other incomes and 50% of the Social Security Benefit which is coming to be 42,000 in the above case and we are assuming that the assessee is filing single person return. So he will require to pay tax on 85% of the social security benefit.

Withheld tax in case of payment recieved by way of Social Security Benefit will be 0.

In case of 401(k) distribution, withholding tax rate is 20% which will come to be 4,800 in our case.

And in case of IRA RMD, there are some conditions whihc will be the deciding factor whether withholding tax is applicable or not.

Assesse total taxable income will be 24,000 + 18,000*0.85 + 9,000 = 48,300

So the total withheld tax will be 4,800 which will be withheld on 401(k) distribution