Estimated Income Tax Payment
Submitted by gblatt@gvtc.com on Fri, 07/06/2018 - 15:39
We are retired and most of our cash flow is out of our IRA accounts and Social Security. I understand that my quarterly estimated tax payments are not part of our "consumption" or "special" funds and is assumed to be a deduction from income.
Since we take money out of our IRAs to pay quarterly tax payments it is taxed as income. Do I need to compensate in some way in my planning or does the program assume that the amount shown as annual withdrawal from IRAs includes not only discretionary and special spending but also the amount I need to pay my income tax?
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dan royer
Fri, 07/06/2018 - 15:55
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Well, the federal and state
Well, the federal and state income tax is accounted for by the program and shown in Regular Assets report and the Taxes report. This income tax is not, as you say, coming out of discretionary spending.
The calculated discretionary spending assumes that you paid this income tax for the year, though it does not specify what funds you use. It doesn't matter. When you look at the Total Income report, you see that this income might come from non-asset sources like SS or pension for example, or it might come from asset sources like retirement withdraws, special receipts, or even real estate cash flow. So those retirement withdraws are subject to tax unless they are Roth and so it all works out. You don't need to do anything special. The program doesn't care if you are paying taxes from your SS check or your retirement accounts or whatever other the source. It's just having you pay the tax on the amount of withdraw that is shown in the report. If you withdraw more than what is modeled in the report, you should indicate that with a special withdraw so that the program calcs the right tax.
I hope that helps.
Dan