Pension Lump Sum and Taxes - MO

[jrwpmw]

What is the name of your state?MO
After leaving my last job, I cashed in a small amount that I had in my Pension. They took the required 20% fed tax out, but not the 10% penalty or any state taxes. I'm 43 years old and not near retirement age and I don't plan to roll any of this money over to an IRA.

So my questions are these:
1) Will 20% be all of the Fed Taxes I pay or will I owe more? I'm in the 28% tax bracket, so will I owe an additional 8% OR is the 20% my total Fed Tax?
2) Does Missouri tax this also? If so, any idea of what at what %
3) I assume that I will pay the 10% penalty back at tax time?

 

[Snipes5]

You will pay 28% PLUS a 10% penalty. Yes, you read that right, 38%.

If I were you, I would send the IRS an estimated payment of another 20% of whatever you took out of the fund.

I am hoping that when you stated your tax bracket you accounted for the pension withdrawal. That amount will be added to your ordinary income and may increase your tax bracket further.


MO almost certainly taxes this the same way federal does, although likely without the additional penalty, so if no taxes were taken out for state, you will want to send them an estimated payment also.

All these numbers will be totalled out on your 2005 tax return. If you haven't had enough withheld, which I STRONGLY suspect will be the case, you will owe taxes, and possibly an underpayment penalty for both federal and state on top of it.

For a more explicit explanation, take your information to your tax person if you have one, or to an H&R Block office if you don't. Advice is free, they can help you determine how much you should pay now to make next spring less painful for you.

Snipes