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    dan_white's Avatar
    dan_white Posts: 4, Reputation: 1
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    #1

    Jun 13, 2012, 08:41 AM
    Taxable Payout question
    I am leaving my company and I am rolling over my current pension into a IRA. I have $17,000.00 that is considered a "after-tax" employee contribution, that cannot be rolled over and will be mailed directly to me. This is going to be used to pay off credit cards and put in the bank as a cousion since I will not be making as much.

    My question is, is the after-tax employee contribution going to be considered taxable income at the end of the year? I am afraid that is is going to count as income earned and that I will end up owing taxes at the end of the year for it.

    Thanks for any help!
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #2

    Jun 13, 2012, 08:47 AM
    "After-Tax" means you have already paid income taxes on the money you used to contribute to your pewnsion plan.

    For this reason, it will be returned to you and NO report of the money is sent to the IRS. Hence, the IRS will NOT KNOW that you got it. Do NOT report the distribution as income ANYWHERE on your 2012 tax return.
    dan_white's Avatar
    dan_white Posts: 4, Reputation: 1
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    #3

    Jun 13, 2012, 08:58 AM
    Does this include State Taxes as well?
    Thanks for your reply!
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #4

    Jun 13, 2012, 11:37 AM
    Yes, it applies to state income taxes as well - as ATE said, it's your money being returned to you.

    In January 2013 you should receive a 1099-R form that documents the rollover to the IRA. The amount shown should be equal to the portion that is going to the IRA, and the form will indicated distribution code "G" to signify it's a non-taxable rollover. The after-tax portion of the account that is returned to you should not be included in the amount shown on the 1099-R.
    dan_white's Avatar
    dan_white Posts: 4, Reputation: 1
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    #5

    Jun 13, 2012, 01:42 PM
    Last question. Will the "after-tax" payout be counted as earned income that will potentially raise me to the next tax bracket?
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #6

    Jun 13, 2012, 02:07 PM
    Quote Originally Posted by dan_white View Post
    Last question. Will the "after-tax" payout be counted as earned income that will potentially raise me to the next tax bracket?
    No, it's not reported and it's not counted as income, so it has no effect on your tax bracket. Remember this money was already reported once to the IRS (when you earned the wages that the deduction was made from) and you paid tax on it back then.
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