Accounting, Payroll & Pension Issues/Lump sum distribution


My Dad worked from 10/2000-5/2013 for a supermarket in the US.  They contributed to a retirement plan for him during his employment.  My Dad, born 1932 is now retired. He just opted for their lump sum distribution of his vested amt in 2014 and deposited it into his savings account.  He only has SS income and no assets at all.  Will this payment be considered taxable income for filing next year? Based on his income level, is it possible he won't have to pay tax?  If taxable, what is the time frame for him to roll this into an exempt IRA account?  Thank you!

Since he did not pay taxes on the money it will be taxable to him.  It will be taxable even if he puts it in an IRA account. If he puts it in an IRA account than he can take a tax deduction for the year of 2014 which will offset the taxes owed on the amount.

The amount of the tax due would depend on his income for the year for 2014 added to the retirement amount. The IRA will have restrictions on how much can be drawn out at a time and how many times in a year you can draw out the money. It should definately be put in an interest bearing account so he can draw some interest on it to pay fees. IRA's have annual fees to manage the money in the IRA. He just needs to make sure he leaves enough in to pay whatever taxes he will need to pay at the end of the year. It is generally 25% federal and around 8% state.


Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR


I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.


25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.


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