Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
replied 4 years ago.
The amount of taxes you will owe on this annuity depends on your total other income for the year and your filing status. as that is what ultimately determines the tax bracket you are in.
Merlo. Accountant replied 4 years ago.
Hello again yogster,
I apologize for the delay in responding but I had left the forum by the time you posted your last response.
Even though you may not have exact figures yet on what your 2010 earnings will be, I think you have a good enough idea to help you on tax withholdings. First let me explain that the LT disability payments you received are more than likely taxable. That really depends on how the premiums were paid. If this was a disability policy where your employer paid the premiums for the coverage, then any benefits you receive under the plan are taxable income. I was not sure if you were aware of that or not.
It does look like your income for 2010 will be considerably lower than it was last year.
That being the case, I think you will be more than covered by taking 15% withholding for federal taxes and for VT state taxes your withholding could be reduced to 3.6%.
You said you will file your taxes as a single person with two deductions. That will give you a total of $13,000 in standard deductions for the year. So the first $13,000 you have in earnings will not even be subject to tax. After that point, you can have up to an additional $34,000 in earnings and still be in the 15% federal tax bracket, and in the 3.6% VT state tax bracket. So the botXXXXX XXXXXne here is that if your total earnings for the year do not exceed $47,000, you will not owe any more than 15% federal tax and 3.6% VT state tax.
Based on those figures, I would just make sure you have this amount withheld from your pension checks, and any extra if you have to go back and make up for any shortfalls from earlier in the year.
If this was helpful please press the Accept button. It is the only way we receive any credit for helping with these questions.