How can withholding actually impact your taxes?
You should know that withholding from your retirement plan distributions doesn’t make you immune from filing your taxes. Just like withholdings on your wages, withholdings on distributions mean taxes that are taken out of your income throughout the year.
In this case, you’ll still need to file your taxes when Tax Day comes every year, so don’t forget that you have to report the taxes you already took care of, all your income sources, including your retirement plan distributions, and any deductions or credits you might be entitled to take.
Keep in mind that if you have few deductions and a high income, you might end up paying more taxes than what was actually withheld from your distributions throughout the year. On the other hand, if you have more deductions or a lower income, you might be able to get a tax refund.
If you want to know more about this topic, here’s a good book that will guide you step-by-step throughout this journey of tax withholding on distributions from retirement plans. Check it out here!
If you want to read something else from Easy Seniors Club, here’s a good article for you: COLA in 2024: Will the Benefit Increase Next Year?
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