Taxes

Income tax policy, rules, problems, strategy and software. Property and consumption taxes too.
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Al19067
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Taxes

Post by Al19067 »

I'm receiving 37k after 10% penalty and 20% federal tax, what will I have to pay taxes on? After the 30% or before the 30%? My wife and I made 131k together last year and it's going to be much lower this year bc I lost my job end of march, how much tax will I have to pay or how can I get that figured out?

Thank you
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Peculiar_Investor
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Re: Taxes

Post by Peculiar_Investor »

Welcome to the FWF community.
Al19067 wrote: 25 Apr 2017 03:09 I'm receiving 37k after 10% penalty and 20% federal tax, what will I have to pay taxes on?
Can you clarify this a bit further, it is unclear where/why you are receiving the funds and what 'penalty' is being applied. Is the 'penalty' possibly tax being withheld at source?
Al19067 wrote: 25 Apr 2017 03:09 how much tax will I have to pay or how can I get that figured out?
The general recommendation has been to use tax filing software such as UFile or TurboTax or StudioTax to run through the various scenarios that could be involved in your particular circumstances.
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OnlyMyOpinion
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Re: Taxes

Post by OnlyMyOpinion »

Just wanted to add that taxtips also has an online tax calculator that seemed to work OK for a few scenarios I ran in the past: http://www.taxtips.ca/calculator/cdncalculator.htm
Al19067
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Re: Taxes

Post by Al19067 »

I am only 33 so the 10% is a early retirement penalty and the %20 that they are taking before they cut the check is federal withhold (pre payment)
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StuBee
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Re: Taxes

Post by StuBee »

I think that you will pay tax on 90% of 37K$ (I imagine that the 10% penalty is nonrecoverable). Presuming that this is to be tacked onto the income received in the year you received the 37K$ then your total tax owing will depend on that total income amount. To the tax bill will be credited whatever withholding tax you have already paid (i.e. the 20%).

Is it not possible for you to hide this "income" by rolling it into a registered account???

Others are more familiar with this than I am.
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Re: Taxes

Post by gobsmack »

Al19067 wrote: 25 Apr 2017 18:26 I am only 33 so the 10% is a early retirement penalty and the %20 that they are taking before they cut the check is federal withhold (pre payment)
It sounds like you might be talking about withdrawing from an IRA/401k. Are you a Canadian taxpayer withdrawing funds from an US retirement plan? I was under the impression Canadian RRSPs do not charge any penalties on early withdrawals.
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Norbert Schlenker
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Re: Taxes

Post by Norbert Schlenker »

This sounds like a 401k/IRA withdrawal.

[If the OP is in the US] The full amount - likely 52-53k - is taxable at whatever your federal marginal rate is, and the 20% withheld is creditable against your US tax liability. You'll owe state tax on it too if you live in a state with an income tax, and they'll want it next April 15. The 10% penalty is a dead loss. The only way to avoid these consequences is to deposit the full amount (which is no longer in hand) into a rollover IRA.

[If the OP is in Canada] You're done with the US. The full amount is taxable at federal + provincial marginal rates, and both the 20% US withholding and the 10% US penalty are eligible for foreign tax credit treatment on your Canadian return. A rollover into an RRSP is possible. It's not supposed to use up contribution room, but it's a housekeeping nightmare if you don't have the room. It can also play havoc with the foreign tax credit calculation.
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