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Tax Implications of Pension

Stew

I am on Social Security Disability Income which is and has been the sole source of income for my Wife and I for 10+ years. I have a small pension ($285/Mo) that I'm eligible to to draw through a pension plan handled by the PBGC. I'm not clear of what if any tax implications this would entail. Assuming I would have to pay tax on the pension income, is it viewed independently (ie. taxed as $3,420/yr unearned income) which would be under any tax bracket and therefore $0.00 taxes. Or would it be viewed as my SSDI income + the $3,420 and taxed at whatever bracket that falls into.?

Or something entirely different ? Thanks !!

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Kaycee_Vee75

You're welcome I wish you well

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Kaycee_Vee75

If your pension was a larger amount per year than you could possibly have some of your Social Security taxed. IRS says that Social security is taxable up to 85% of your social income. If husband wife file together and one has w2 wages, puts social security at risk. Pension income or self employment income does the same.

Stew

Who would you suggest I go to for a (free) definitive (when supplied with all the numbers) answer to my question? The Social Security office, ? the PBGC, ? the IRS, ?

Kaycee_Vee75

I am a senior tax specialist at one of the big name tax offices and I have been doing taxes since 1991. I am willing to help you.

Stew

Thank you so much, but you must forgive me, I'm not as sharp as I used to be. (health related)

So I'm married (for 38 years) and SSDI recipient for 10+ yrs. My wife has not worked for 25+ years and for all practicable purposes is incapable to do so now. So my SSDI is what we've gotten by with for these past 10+ years. During this time I've not been required to file any tax forms. If I file the paperwork to receive the pension I will receive around $285/Month from it. My SSDI income is $33,960/ year (yes at one time after 9 years of night school to earn my degree I had just started to make real money when bad things fell upon me)

Anyways, if I were to begin taking my pension benefit payments, I'm assuming I would have to also file tax forms each year. What would you do ?

Thank you so very much, Seriously THANK YOU SO MUCH !

Stew

https://community.freetaxusa.com/discussion/comment/1564#Comment_1564

This is an addendum to my response, …. I'm pretty sure I have less than 2-3 years left and I'll be under ground so that is a driving force in taking my pension to be sure

Kaycee_Vee75

You will have to file a tax return because your investments have to be reported on your return. The other income involved is what they want to see. Your ssdi isn't taxable but pension income should have withholding so your not paying a large amount at the end of the year. Unless you have a retirement that has special treatment where taxes are concerned, you do have to show those dividends, interest and distribution of that investment.

Kaycee_Vee75

Take your money as long as your over age 55 and won't get penalized for taking your investments out earlier. Take it and have them hold withholding. You more than likely will get what was with held back or if you know that your amount at the end of the year is less than 13000. If I were you I probably wouldn't fill a tax return because you should get all that was withheld back in a refund. The IRS request that if you have investments to file a tax return but if you know that you're always going to get your money back no matter what I wouldn't file it, what will they do, penalize you? They owe you money. I think that would be a waste of IRS time but that is my personal opinion. The IRS request that you do file. If you do have a pension without any other taxable income in my opinion it would be kind of irrelevant.

Stew

When considering the taxes that I would have to pay on the pension income ($285/Mo) what tax bracket would it fall into? Would I be looking at paying taxes on $3,420 in the $3,400-$3,450 tax bracket (if there is one, I haven't looked) or is it considered to be in addition to my SSDI income and therefore falls falls into the $37,000-$37,500 tax bracket. I'm so very sorry to be a PITA, I've never before been able to find any help.

Stew

https://community.freetaxusa.com/discussion/comment/1569#Comment_1569

Sorry I didn't see this reply in time …. you're awesome !!! I can't thank you enough

Kaycee_Vee75

You're welcome I wish you well