Income tax for 2020
I usually pay about $200 income tax yearly. My last tax cost $1,739. I did increase my quarterly IRA withdrawals from $2,000 to $2,500 in 2020. Explanations from my accountant are as follows: Income increase in 2020 also caused the taxable portion of your Social Security income to increase. Of the $1,739, $839 is for the balance due on my 2020 federal tax return. $900 payment is an estimated tax payment for your 2021 tax return. Paying tax for two years. Could you please help me understand why I paid so much more in taxes? Will this continue? Did I make a mistake by increasing my quarterly withdrawals by $500? I’m 77, cover my living cost with my monthly pension of $1065.27, social security of $2084.10 and quarterly IRA withdrawals of $2,500. Thank you so much.
Terry Says
Your accountant is correct. So ask him/her how much you can withdraw so your benefits aren’t taxable. You’ll want to stay under that limit if possible. But if you need the money to live on, you’ll just have to take the withdrawals and pay the taxes. Good thing you have that money in your IRA.
And to make sure you don’t incur a penalty, the accountant set you up with a quarterly estimated tax payment. That’s a good idea. You’ll be happy next Spring when you file your 2021 taxes.
