Retirement Taxes

[Anonymous]

I am very close to retiring and had not given much thought to how I will be paying my taxes.

I just assumed I would pay them every year before April 15th (which I have done in the past, using a tax software).

But yesterday, a co-worker mentioned that I will have to make payments quarterly since it will no longer be subtracted from my income by my employer.

Is that correct?

[Anonymous]

Yes that's correct.

https://www.irs.gov/forms-pubs/about-form-1040-es

Many retired people have to do estimated tax payments 4 times/year because there is usually no withholding done as they do account withdrawals and get social security payments. You should also check your state rules on estimated payments.

[Anonymous]

Anonymous wrote:Yes that's correct.

https://www.irs.gov/forms-pubs/about-form-1040-es

Many retired people have to do estimated tax payments 4 times/year because there is usually no withholding done as they do account withdrawals and get social security payments. You should also check your state rules on estimated payments.

Wah!

[Anonymous]

Depends on whether you actually owe taxes.

[Anonymous]

There are probably other considerations you need to think about before you retire as well, depending on your age, financial circumstances, whether you have a pension, your SS claiming strategy, Roth conversions:

https://www.schwab.com/learn/story/6-things-to-do-if-youre-nearing-retirement

[Anonymous]

Anonymous wrote:Depends on whether you actually owe taxes.

Oh, I will for sure. All of my retirement savings are pretax (in a 403b).

[Anonymous]

Anonymous wrote:There are probably other considerations you need to think about before you retire as well, depending on your age, financial circumstances, whether you have a pension, your SS claiming strategy, Roth conversions:

https://www.schwab.com/learn/story/6-things-to-do-if-youre-nearing-retirement

Thank you. I have met with a financial advisor and discussed most relevant topics (my budget in retirement, social security strategy, insurance options, etc). We did not discuss, however, my PROCESS for paying taxes.

Another new life phase lies ahead! She may have thought I use and accountant, but I have not up to now.

[Anonymous]

Anonymous wrote:

Anonymous wrote:There are probably other considerations you need to think about before you retire as well, depending on your age, financial circumstances, whether you have a pension, your SS claiming strategy, Roth conversions:

https://www.schwab.com/learn/story/6-things-to-do-if-youre-nearing-retirement

Thank you. I have met with a financial advisor and discussed most relevant topics (my budget in retirement, social security strategy, insurance options, etc). We did not discuss, however, my PROCESS for paying taxes.

Another new life phase lies ahead! She may have thought I use and accountant, but I have not up to now.

It is not at all complicated. You can do it all on line. You just need to know how much to pay.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There are probably other considerations you need to think about before you retire as well, depending on your age, financial circumstances, whether you have a pension, your SS claiming strategy, Roth conversions:

https://www.schwab.com/learn/story/6-things-to-do-if-youre-nearing-retirement

Thank you. I have met with a financial advisor and discussed most relevant topics (my budget in retirement, social security strategy, insurance options, etc). We did not discuss, however, my PROCESS for paying taxes.

Another new life phase lies ahead! She may have thought I use and accountant, but I have not up to now.

It is not at all complicated. You can do it all on line. You just need to know how much to pay.

Yes the forms to calculate how much to pay are pretty simple. We have had to do it a few years when one of us got a contract for a side gig. You need the same basic info you will already have from doing your taxes in the past. It's all in the 1040-ES PDF- the worksheet to calculate your estimated tax due is on page 8.

[Anonymous]

You can have taxes withheld from your social security each month if you want.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There are probably other considerations you need to think about before you retire as well, depending on your age, financial circumstances, whether you have a pension, your SS claiming strategy, Roth conversions:

https://www.schwab.com/learn/story/6-things-to-do-if-youre-nearing-retirement

Thank you. I have met with a financial advisor and discussed most relevant topics (my budget in retirement, social security strategy, insurance options, etc). We did not discuss, however, my PROCESS for paying taxes.

Another new life phase lies ahead! She may have thought I use and accountant, but I have not up to now.

It is not at all complicated. You can do it all on line. You just need to know how much to pay.

Yes the forms to calculate how much to pay are pretty simple. We have had to do it a few years when one of us got a contract for a side gig. You need the same basic info you will already have from doing your taxes in the past. It's all in the 1040-ES PDF- the worksheet to calculate your estimated tax due is on page 8.

Haven't ever done a withdrawal from a retirement account, but I think you can also choose to have 20% withheld at the time of withdrawal and automatically paid to the IRS, much like regular wage withholdings. Not sure if that's possible for state taxes. You still may owe more though because of what bracket you are in, and still have to pay estimated taxes. You owe estimated taxes, generally, if your untaxed income is more than 10% of your taxed income. Which is why if you have had minor untaxed income in the past as part of your full income, you never had to pay estimated taxes. If you make $100k from your regular.job that has normal withholding, and have a $5k contract for a side project one year, you won't have to pay estimated taxes that year, and just report the extra income on your tax forms by April 15 of the next year, and pay the tax due on the extra amount.

But if you had a contract one year for $20k in extra pay, you would exceed the 10% carveout, and have to pay estimated taxes quarterly to ensure you paid enough throughout the year on all that extra untaxed income.

[Anonymous]

Your CPA can provide estimated quarterly tax amount for you. You can have the funds withdrawn electronically.

[Anonymous]

I do quarterly payments that end up equaling my prior year taxes unless I know my income will be lower.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:There are probably other considerations you need to think about before you retire as well, depending on your age, financial circumstances, whether you have a pension, your SS claiming strategy, Roth conversions:

https://www.schwab.com/learn/story/6-things-to-do-if-youre-nearing-retirement

Thank you. I have met with a financial advisor and discussed most relevant topics (my budget in retirement, social security strategy, insurance options, etc). We did not discuss, however, my PROCESS for paying taxes.

Another new life phase lies ahead! She may have thought I use and accountant, but I have not up to now.

It is not at all complicated. You can do it all on line. You just need to know how much to pay.

Pschaw! It will feel complicated when you are in your 80s or 90s.

[Anonymous]

Anonymous wrote:Your CPA can provide estimated quarterly tax amount for you. You can have the funds withdrawn electronically.

OP does her own taxes.