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Susan Tompor: How retirees can check if they're having enough taxes withheld

Susan Tompor, Detroit Free Press on

Published in Senior Living News

If you're retired or soon to retire, one big thing you'll need to ask is: Am I going to be socked with a huge income tax bill come April?

"During the first year or two of retirement, it's a big transition tax wise," said George W. Smith, a certified public accountant with his own firm in Southfield.

"It's a whole new tax reporting ballgame for them."

Many times, newbies to the retirement game get caught short on how much they've withheld for taxes out of their pension checks. And many times, they're not even aware that they're dealing with a new set of retirement-related tax forms.

"No more W-2s. Now it's 1099-Rs for pension and IRA distributions," he said. "And SSA-1099s for Social Security benefits."

This summer, the Internal Revenue Service launched its much-anticipated Tax Withholding Estimator. For those still on the job, the idea is to spend some time plugging in your own numbers to calculate whether you're having enough money withheld from each paycheck to cover your income tax bill.

 

There's much publicity about getting a "Paycheck Checkup" to review your potential income tax bill now. Someone who just bought a home, had a baby or just saw one of their kids turn age 17 is going to want to use the estimator. (Tax breaks are less generous for families who have children age 17 and older.)

But what about a checkup for those pension checks? It's a smart idea for retirees.

The IRS has begun making a push to alert retirees that the new estimator can help judge where you're at tax-wise if you're retired and getting a pension check or withdrawing money from a 401(k), too.

The task is essential if you're unsure how your tax deductions changed under the Tax Cuts and Jobs Act of 2017.

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