Tax Law (Questions About Taxes)/annuity proceeds

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QUESTION: My mother named her children as beneficiaries of her annuity.  If I receive my proceeds as a lump sum, how much tax do I request be withheld? I was told $4K of the $7K is taxable.  The form mentions 10% as default.  My sister was advised to request 20%.  Thanks.

ANSWER: Elaine,

Thanks for your question.

It all depends on your marginal tax bracket.  Brackets are 10, 15%, 25%, 28%, 33%, and 35%.  Since this is additional income, you would be well-served to have withholding at your current marginal rate.

Hope this helps.

John Stancil, CPA

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

QUESTION: We are on Social Security with about 10K extra from a home business.  Turbo Tax says our effective tax rate has been between 3 - 6%.  Don't know what our current marginal bracket or rate means.

Answer
The marginal bracket is the rate at which the next dollar of income is taxed.  This link shows the marginal brackets.  Just find your filing status and your taxable income to determine your marginal bracket.  

http://taxfoundation.org/blog/2013-tax-brackets

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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