What implications are there to withholding taxes on pensions?

Follow
Share

Mom was told by the nursing home (business office) to stop the tax withholding on Dad's pensions because he's now institutionalized. Of course there was no reason given. I don't see anything in tax law as to why that step should be taken. Before we do anything, I want to find out what implications there are to withholding taxes on pensions.

This question has been closed for answers. Ask a New Question.
Find Care & Housing
8

Answers

Show:
My husband receoves a retirement check monthly. We have a 20% withholding taken from it for federal tax. We do not pay state tax where we live. The tax owed is based on what percentage he contributed to his retirement and what percentage the city he use to work for contributed. Yes, sometimes a pension can be confused with a retirement. My father has a pension from his old employer. My dad is 89 and his income is low enough that he is not required to pay taxes.

I think the most important thing here is to understand why the facility is asking that you eliminate the withholding. Maybe your father's income is no longer taxable because of his age and the fact that it goes to his care in a facility.

You can guess until the cows come home, but, in my humble opinion, it's best to understand the facilities point of view and then confirm it with an accountant.

Cattails
Helpful Answer (1)
Report

Thanks all for the feedback; I've been looking for elder law attorneys at our local AOA, will look harder. Legal Aid has proven to be too vague and impossible to get an appointment with.
I'd ask the BO but they seem to believe they don't need to explain anything, their orders simply must be obeyed, period. Their ongoing high-handed manner is the reason I'm seeking answers elsewhere. They've mistaken my mother's mild mannerism for an easy pushover. Not too long now before they realize their mistake. : )
Helpful Answer (0)
Report

You might also be able to find a Volunteer through your LOCAL Area Agency on Aging. They often have lawyers come in to their office, to schedule sessions with elders needing legal help.
States often also have a Justice Project, which can provide legal help on a sliding scale, free for those with least income.
Helpful Answer (0)
Report

It depends on the kind of Pension, Fund, Investment, or SSI, whether withholding is needed.
Some people use the term "pension" interchangeably with other retirement funds, which can cause confusion and mistakes.
Ask a Tax Accountant.
You will need to provide details about the funds in question, as well as the circumstances, for a really informed answer to be given.
Helpful Answer (0)
Report

Pensions are different from IRA's. No withholding is necessary on a Pension distribution. Enter the entire pension payout for the entire year ( 2011, 2012 or whatever year you are filing) on Line 16A on the first page of the 1040. The software that you use will calculate the taxable amount ( if any) and enter it on Line 16B. This is the only line that counts. If you do not use standard software: Tax Cut or Turbo Tax, then you can calculate it yourself with the Worksheet found in the Booklet from the IRS. Good Luck. Listen to no one except an accountant.
Helpful Answer (0)
Report

Absolutely correct to keep having withholding until you learn if it is proper to stop it. Many people post-poned having their pension money taxed, until ther retirement, betting that inflation and income condtions would put them into a much lower tax bracket than when they were actively earning.
Having taxes withheld, and how much, depends on a number of factors.
Find out why the nursing home recommended that.
Then take that info to your accountant or tax person to find out if it is kosher or not.
It would be really rotten if you went ahead and stopped that withholding,
then learned it had to get repaid to the IRS out of your parents estate, or something.
Helpful Answer (0)
Report

You could also talk to the business office at the facility to better understand their reasoning. For example, is all of your father's pension supposed to go to the nursing home? Is he on Medicaid with a spend down? If you know what the business office is claiming, you will be better equipped to explain it to your mom's CPA. Good Luck
Helpful Answer (1)
Report

You need to talk to an accountant preferably the one who does your mother's tax return. The money that originally went into the pensions or IRA was probably done pretax, meaning when it is paid out, it is taxable. This is why they are withholding tax money from the pension. It really depends on your mother's finances, look at her tax return. Did she get back all the tax that was withheld or would it increase her income so she'd have to pay in? I'd do some checking before changing anything. Best Wishes!
Helpful Answer (1)
Report

This question has been closed for answers. Ask a New Question.