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Cashing in Your Pension Early - Tax Implications

Outline: Cashing in your pension early may seem like a good idea if you are short on cash but taxes have to be paid sometime.

Main Digest

Cashing in your pension early can seem like a good idea if you're short on cash, but the taxes have to be paid sometime.

This fact is easy to overlook with a large lump sum payment coming to you. This is what happened to Lenora (Los Angeles, CA) when she cashed in her pension in 2009, which ended up granting her a headache along with an IRS debt of over $25,000 for that year. As a result, she also had a sizable debt with the Franchise Tax Board.

When she came to the Blue Tax offices for help, their team of experts knew it would be a challenge to negotiate an affordable payment plan for the tax debt owed. The experts at Blue Tax made a goal of averting all collection action and putting client on a Currently Non-Collectible status with the IRS.

First, Blue Tax contacted the IRS to map out a resolution and sent the client the Blue Tax welcome packet. Once Lenora had filled out and returned the packet, Blue Tax completed her full IRS financial analysis. Blue Tax then contacted the IRS to go over the detailed analysis. Blue Tax was able to demonstrate through the prepared financial that the client did not have the ability to pay back the debt. The IRS agent then submitted the client for their manager approval on her Currently Non-Collectible status application. Blue Tax next tackled Lorena's California Franchise Tax Board financial.

Without even having completed the financial yet, the Blue Tax team was able to negotiate a $105 payment plan for the Franchise Tax Board. The client asked Blue Tax if they could get it any lower. Blue Tax was then able to negotiate a $75 dollar payment plan. Lorena, needless to say, was happy with that. Blue Tax soon learned that the client was approved by the IRS manager to be on a Currently Non-Collectible status. And all was well for Lenora!

For more information about Blue Tax and its ability to help taxpayers resolve their tax problems, please visit www.BlueTax.com or call (888) 310-5858 for a free confidential consultation.


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Cite:
Journal: Disabled World. Language: English. Author: Blue Tax. Electronic Publication Date: 2011/04/25. Last Revised Date: 2011/04/25. Reference Title: "Cashing in Your Pension Early - Tax Implications", Source: Cashing in Your Pension Early - Tax Implications. Abstract: Cashing in your pension early may seem like a good idea if you are short on cash but taxes have to be paid sometime. Retrieved 2019-11-13, from https://www.disabled-world.com/disability/legal/tax/cashing-pension.php - Reference Category Number: DW#470-7496.
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