 then we're gonna say there's the hundred and then this is back to just normal withholdings or standard deduction of a single individual that's not over the age limit to boost it up there's the 8750 so 80 80s 850 and so because I have a thousand in the distribution 1000 in the distribution 101 12 950 8850 okay so then if I go to page 2 calculates the tack 14994 I'm gonna let I'm gonna do that 14994 and then we also have this hundred dollars of other taxes so it's and it's coming from Schedule 2 as you can see so Schedule 2 we've got the hundred thousand of additional taxes so if I was to add like a Schedule 2 here what let's add that I'll say Schedule 2 is additional taxes so we'll deal with that later or let's just pull it in here I have other taxes here so let's pull it in from this tab that I started and then so we had self-employment and let's say that we call this what what are we gonna call it we're gonna call it we're gonna call it additional tax on IRA so added added tax on IRA my makeup save a little bit of room added tax on the IRA and let's make it black and white so I'll make it black and white we shouldn't need much space down below because we shouldn't have that happening all the time so I'll just have a couple fields for it maybe to make it blue and bordered and then IRA one or whatever the IRA is and you could calculate it the added tax is usually going to be equal to the IRA distribution which was 1000 times 10% point one times 10% point one so so 10 hold on a second k plus oh this 1000 times point one 100 and then we'll have total total added tax on IRA equals the sum of those two and then this totals it up down below so that should pull into page one of the added tax bringing us to 1594 so 1594 if I go to the 1040 page to just to double check this 1594 and then we paid 15,000 so that gets us down to the to the 94 so that's the general idea this amount do this time so that's what you don't want to see happen a hundred dollars doesn't look too bad but obviously you can see that can start quite big quite quickly if someone just pulled out their their entire IRA or similarly if they pulled their entire 401k and just say ah just give me the 401k if I'm switching jobs or something because then you're gonna get hit with a big penalty because that could be quite substantial in dollar amount that could be in the 401k so be careful of that now what you could do to not have that happen is roll it over so I'm gonna say I don't want to see a one there I want to see a G there and that's going to indicate that it's a that it's a rollover of some kind so so you're hoping when you go to another or financial institution to have your investments in you don't want to pull your money out and then put them on you know well you you might be able to structure it that but that way but you would like to make sure that you structure it in some type of way that it's going to qualify for a rollover and oftentimes you might want to go to the new financial institution and say hey look I'm rolling my money over from whatever it was before Vanguard or E-Trade or whatever and I'm putting it in here I want you to structure that as a rollover under whatever kind of retirement account will fit because it's currently under an an IRA or something and usually the financial institutions wanting to have your business will be able to help you facilitate that and they're quite quite kind in doing so because you know they want your money in their place instead of the other place so just make sure to do that otherwise you can hit with penalty and that would be bad so now you got the same 100,000 now though it's calculated as a rollover now note that when you do that some people's well actually now it's not going to be taxable at all so now I'm going to go back on over and say there's nothing here so we're going to say now there would be something in box one possibly but not box to a because it's saying hey look there was kind of like a distribution meaning it came out of one account that's under the umbrella of an IRA but it went into another one therefore it's not a taxable event and that's what you'd like to be able to see why isn't it because of the description code that's going to be down here which calculated it as a rollover which is usually the most common format of it not being taxable so so if someone needs the money notice that in like this this whole like emergency thing when when the government told people that they couldn't go to work or anything because of social distancing with the whole covert thing that caused financial emergencies to many people and many people can come up with financial emergencies for whatever reason right they need the money they have the money it's in their IRA or under their IRA or 401k plan but they can't take it out because if they take it out they get hit with a penalty so in those kinds of situations you want to you want to see okay is there any kind of situation where it can have it have it like this where I can pull the money out in some way and have some rationale which would be box represented by these codes that would allow me to take the money out right without getting hit with a penalty you're still gonna have if you were to take the money out and not have it rolled over then you still might have to pay taxes on it so let's say you took the money out and the government said well now it's a qualified way you took it out because of an emergency well then they're just not gonna hit you with a tax I mean the added tax penalty but they're still gonna make you pay the taxes on it because because you got you got the benefit when you put the money in for it in this case you're not actually really taking it out you're just rolling it over but if you did take it out and you had a qualified reason for taking it out then it's likely it would still be recorded as income but you wouldn't be hit with that 10% penalty so a lot of time people get confused between the fact that it's recorded as income and the fact that you're getting hit with a 10% penalty if you're actually taking the money out and not rolling it over even if it's a qualified distribution usually because you're in retirement age or possibly because there's some other like reason for taking it out early then then you're still gonna have to record it as income most likely you're just not gonna get hit with the 10% penalty in that case that's the general rule so now we're saying it's over here is an IRA distribution but none of it's a taxable amount and they give you the code up here which is basically saying it's a rollover so now we're telling the IRS look this matches what's on the form so but it's a but it's a rollover so then it wouldn't be included in income so those are the general rules just remember that if you're dealing with someone that's in retirement it's likely that you're gonna see a lot more of this kind of activity and it's likely that you're gonna have to do a little bit more complex work possibly with managing the withholdings through the distributions from IRAs and pensions and whatnot or possibly calculating estimate of tax payments whereas if the W-2 wage is usually obviously the withholdings are calculated up top with the withholdings and then on the input side when you're putting money into the retirement plans which we'll talk more about later because right now we're talking about the income side of things when we're talking about the putting money into an IRA it's kind of like a deduction in some ways right it's an above the line deduction or a removing of the amount from income that would be reflected on the W-2 form so then you're gonna get a tax benefit when you put the money in so when you put the money in you basically get a tax benefit which is kind of like a deduction or the equivalent being a reduction of the taxable income and then when you take the money out you're gonna get hit with the tax because it's just a deferral and if you don't take it out because you're in retirement and you have no other reason to take it out you could also get hit with a penalty also just want to point out that the only reason you put the money into an IRA account or a 401k is not because it's some special magical investment that the government made up right the government's not good at making up investment tools the government is just good at not hitting you when you put your money somewhere so they're gonna say I'm not gonna hit you with with taxes if you put your if you put your money under this investment tool that was made up by financial investors just smart people not the government right and then it's up but it's under the umbrella of of an IRA or whatnot to have a tax shelter so the government doesn't hit you when you put your money there they're gonna hit you when you take the money out is the general rule so in other words most IRAs 401k plans are using the same investment tools that you would use even if the government wasn't incentivizing putting money into these types of accounts which would be mutual funds typically stocks and bonds and whatnot