Unanticipated additional income for 2014 kick to the groin.

[HAL9000]

I had a whole life policy cashed in, in 2014. The problem is I asked for it to be cashed in 2015, to give me time to deal with the additional income related to taxable income. The insurance company made a mistake they admitted to. They can't fix it.

So long story short, I have about 10k of additional income for 2014 that I wasn't expecting and now I owe an additional couple thousand in federal taxes, due to the unanticipated increase in taxable income.

Is there anything I can do to offset that income now? The cash from the policy is available and I was planning on investing it in stocks. I was thinking of putting it into an IRA, but when I ran that scenario through TurboTax it either made no difference or actually increased my taxes due.

My income is now $142k for 2014. Taxable is around $98k now. I have a 401k through employer and I do not contribute to any other tax deferred savings vehicles.

[dandarc]

Single / Married?  # of children?

[HAL9000]

Single income, Married, 3 tax deductible kiddos.

[dandarc]

Any idea what your AGI is currently?

[dandarc]

And are you filing jointly?

[catccc]

Contribution to a traditional IRA if your AGI is low enough?  For you and spouse?  $11K there, if you are eligible.

Oh, just read that you tried that.  What is your AGI?

How could contributing to an IRA ever increase taxes due?    IDK, something seems fishy...

[HAL9000]

Filing Jointly.

$142k Income
$26k deductions
$97k Taxable Income (AGI?)
$14.5k Total Tax Due

[dandarc]

If you haven't already, you could put $5500 into a traditional IRA for your wife - that would shelter more than half the windfall.  I put your AGI if you're filing jointly at no less than 129K - well within the 181K limit.  Unfortunately, I don't think a contribution for you would be deductible - so go Roth if you want to go the IRA route with the $4500.

http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

You have until your tax filing deadline to do that - so April 15th most likely.

[Gone Fishing]

Is your spouse covered by a retirement plan at work?

[catccc]

If you haven't already, you could put $5500 into a traditional IRA for your wife - that would shelter more than half the windfall.  I put your AGI if you're filing jointly at no less than 129K - well within the 181K limit.  Unfortunately, I don't think a contribution for you would be deductible - so go Roth if you want to go the IRA route with the $4500.

http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

You have until your tax filing deadline to do that - so April 15th most likely.

Modified AGI must be under 96K for full deductibility and under $116K for partial deductibility, if you both have access to retirement plans at work.  If you don't, yes, 181K.

[dandarc]

Taxable income is not your AGI - AGI is at the bottom of page 1 of your 1040.  I think 142K is your AGI - 26K in deductions only makes sense if you haven't included the personal exemptions, which for a family of 5 is 19,750 for 2014.

142K is the number from your W-2, then yes?

[dandarc]

Single income, Married, 3 tax deductible kiddos.

Bumping this.  Also - I think I used the term "wife" earlier - should have said spouse in case I'm wrong about the gender there.  Sorry about that.

[dandarc]

If you haven't already, you could put $5500 into a traditional IRA for your wife - that would shelter more than half the windfall.  I put your AGI if you're filing jointly at no less than 129K - well within the 181K limit.  Unfortunately, I don't think a contribution for you would be deductible - so go Roth if you want to go the IRA route with the $4500.

http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

You have until your tax filing deadline to do that - so April 15th most likely.

Modified AGI must be under 96K for full deductibility and under $116K for partial deductibility, if you both have access to retirement plans at work.  If you don't, yes, 181K.

Yes - given the single-income household, lower limit for non-working spouse is 181K, and for the working spouse (with access to retirement account through work) the range is 96K - 116K as you've mentioned.

[dunhamjr]

similar thing happened to me with a forced $30k RSU sale.

no mistake on the sell dates, etc. 
but i am/was forced into a tax situation that i did not have time to make corrections for. :(

i was already maxing out my 401k, HSA, DC FSA. 
wife putting in 10% on her defined contribution plan. 
and AGI too high for pretax IRA's.