Taxable Amount
March 30th, 2011
Question: how do i determine the taxable amount on 1040a line 12a and 12b?
Answer: You have received a 1099-R from one or more retirement plans. The short of it is that you will see the gross in Box 1 and the taxable amount in Box 3. Very nearly always, there will be a number within Box 2. Usually it will be "7". That means that your IRA, pension or annuity withdrawal is fully taxable, unfortunately. Very rarely is there an exceptoin. If there's a "2", you can look in to it, but nearly always it is taxable. The 1099-R will show the taxable amount about 2/3 of the time. Usually, there will be no doubt. You should call the toll-free number if there is. Rarely, you will not be able to get an answer, so you could call the IRS number at 1-829-3676 or 1-800-829-1954.
The nitty gritty is that the taxable amount is usually 100% of the amount of the pension or annuity. The very nature of the beast means you will have to pay tax when you receive a 1099-R. You may get Federal income tax withheld if you choose. I would send in estimated tax: a little in April and June, then a little more in Sept and enough in Dec to make I'm covered and still have some money for the bills during the year.
Irrevocability rule on the option to carry over excess income tax
Under Section 76 of the Tax Code, a taxable corporation whose total quarterly tax payments during the taxable year is not equal to the total tax due on the entire taxable income of that year, shall (1) pay the balance of tax still due, (2) carry-over the excess credit, or (3) be credited or refunded with the excess amount paid, as the case maybe.
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