Solved

Taxing on Monthly Pension Payments

Forum|Forum|1 year ago
April 2, 2025
1 reply
0 views

Is it possible to not have federal and state taxes withheld from monthly pension payments if you plan to deposit the entire payment into a traditional IRA within 60 days of receipt? Right now, we're having federal and state taxes withheld each month, and we're contributing the net amount into the IRA. We have to come up with the taxed amount to equal the gross amount for it not to be taxed further. We're paying taxes on it each month and when it's time to have the distributions from the IRA several years down the road, we'll be taxed on the distributions yet again. BTW, they will not do a direct rollover. Thank you for your help.

TurboTax Premier Online

Best answer by VolvoGirl

No you can't do that. Your pension will be taxable. But you can do anything you want with the payments except you can't "roll it over" to a IRA like within the 60 days. That is only for 401K or IRA plans. You have to take the pension and pay tax on it. You can use the the money to make a NEW IRA contribution providing you are eligible to make a contribution. You need W2 wages or a net profit from self employment income to make a IRA contribution.

VolvoGirlAnswer

No you can't do that. Your pension will be taxable. But you can do anything you want with the payments except you can't "roll it over" to a IRA like within the 60 days. That is only for 401K or IRA plans. You have to take the pension and pay tax on it. You can use the the money to make a NEW IRA contribution providing you are eligible to make a contribution. You need W2 wages or a net profit from self employment income to make a IRA contribution.

D

dmertz

Periodic payments paid for life or a period of more than 10 years are ineligible for rollover and the taxes on the taxable amount cannot be avoided. Otherwise, you can use the cash for whatever you want, including funding an ordinary IRA contribution as long as you or your spouse have the necessary compensation to support the contribution. An ordinary traditional IRA contribution may or may not be deductible depending on filing status, modified AGI for the purpose and whether you or your spouse is an active participant in a workplace retirement plan.

You can adjust your federal tax withholding by submitting Form W-4P to the pension plan.

H

H4T3m4t2Author

Thank you for the helpful information. When you said in your reply:

You can adjust your federal tax withholding by submitting Form W-4P to the pension plan.

Can you specify how exactly (besides submission of W-4P form) one should adjust the federal tax withholding? If it's adjusted to have a lower tax withheld, do you have to come up with paying the intended amount withheld in estimated taxes or?? I"m confused by this part of your response. Thanks again for your help!