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Question
Dear Vanessa:
I am planning on retiring in July '10 (age 58) and my pension should amount to approximately $1,000/mth. How can I determine what taxes will be taken and will be I entitled to a tax refund in '11?
I do plan on working part time but need to know if this will be enough. Thanks for your help.
Hi Rita-
The brokerage that holds your pension should withhold tax for you. If they don't, or if you want them to withhold more, then you'll need to contact them and request that. If that were your only income, you would likely not owe any tax. Because you are planning on working part time, you could also choose to increase your paycheck withholding to account for the additional pension income, if that's preferable to contacting the brokerage. What you can do to estimate your tax liability is download or print Form 1040-ES. It has a worksheet that helps people determine how much to pay in quarterly estimates. While you won't need to make estimated payments if you have the tax withheld, the worksheet should still prove useful in deciding how much to withhold either from your pension income or in addition to your normal paycheck withholding.
Best of luck to you!
Vanessa
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Answers by Expert:
Vanessa D. Powell, CPA
Expertise
I am experienced with general bookkeeping, payroll, journal entries, adjusting entries, all types of pension accounting, compliance issues, ERISA, benefit plan auditing, financial statements, payroll tax, Form 5500, retirement planning, and related issues. Please no homework questions. Only US accounting, please.
Experience
I am a CPA in Southern CA. I audit not-for-profit organizations, corporations, and employee benefit plans for the large accounting firm I work for, as well as performing other attest services, planning, and tax services.
Organizations
California Society of CPAs, American Institute of Certified Public Accountants
Education/Credentials
Licensed CPA in the state of CA. Graduated summa cum laude from Colorado Technical University. In order to keep my license, I take 80 hours of CPE every two years. Much of it in the field of accounting, auditing, and employee benefit plans.
Awards and Honors
Graduated summa cum laude (with highest honor).
Past/Present Clients
I have clients from all over the world, in nearly every industry. Most of my audit clients are employee benefit plans and not-for-profit entities. Most of my compilation engagements are manufacturing, agriculture, and construction.
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