December 13, 2018 at 9:24 pm #1796
Person was disabled before retirement age and is taking withdrawals from pension plan which contains his contributions. For disability
withdrawals is all of pension taxable? Normally I would think of using the simplified method but is that out of the picture here because it is not normal retirement age?
December 13, 2018 at 10:54 pm #1799Cape retireeParticipant
- This topic was modified 2 years, 9 months ago by kaneohe.
My recollection of disability pensions where employee contributes a percent to the cost of a company disability plan was that the percentage of the cost the employee covered was not taxable. So, if $25,000 in annual payments, and employee had paid 75% of the premiums, then only $6,250 of the disability payments (the portion paid for by employer) were taxable.December 14, 2018 at 12:15 am #1800
I didn’t quite word the OP correctly. Taxpayer is still less than normal retirement age.
Found this in Pub 575 p.5:
If you retired on disability, you generally must include in income
any disability pension you receive under a plan that
is paid for by your employer. You must report your taxable
disability payments as wages on line 7 of Form 1040 or
Form 1040A or on line 8 of Form 1040NR until you reach
minimum retirement age. Minimum retirement age generally
is the age at which you can first receive a pension or
annuity if you aren’t disabled.
You may be entitled to a tax credit if you were permanently
and totally disabled when you retired.
Beginning on the day after you reach minimum retirement
age, payments you receive are taxable as a pension
or annuity. When you receive pension or annuity payments
you are able to recover your cost or investment.
Your cost is generally your net investment in the plan as of
your annuity starting date. It doesn’t include pre-tax contributions.”
The info above talks about treating the payments as wages when less than normal retirement age. Then it talks about treating them as pensions when you are of retirement age. Only at that point does it discuss recovering your cost. That’s why I was wondering……December 14, 2018 at 12:22 am #1801dienerteParticipant
Kaneohe – Sounds like a certain “Daniels” scenario I was looking at earlier this afternoon. Is my thinking correct? Tom D.December 14, 2018 at 1:00 am #1802
You just can’t do anything in private anymore 🙂 . I decided to start on the “extras” instead of the 2 assigned for the first lesson. Last night I had a dream that the answers were in the workbook to make self-learning easier. No such luck……ain’t no answers to compare with…..seems to me that would be better for self-learners so you can check yourself right away instead of waiting in ignorance.
btw……..thanks for putting your old signature there so I didn’t have to puzzle about the new name.
- This reply was modified 2 years, 9 months ago by kaneohe.
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