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Year End Withdrawal to Pay Taxes?
12-15-2018, 05:07 AM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 8,332
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Year End Withdrawal to Pay Taxes?
This should be a quickie:
Someone here (redduck?) once suggested that they figure out an estimate of their April Fed tax due. Then at the end of the year, withdraw that amount from their IRA and have 100% withheld.
I'm starting to think that's a good way to go.
Any downside to that idea?
In this market, I'd be likely 'banking' the money (taking it off the table) rather than missing gains for 4 months (as in a normal market).
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Retired @ 52 in 2005
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12-15-2018, 05:26 AM
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#2
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,155
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Yes, it's a good substitute for estimated tax payments. Don't forget to include the tax on the amount withdrawn from the IRA. And be sure to do it early enough in December to be sure the transaction is completed. The advantage is that any tax withheld from anywhere is considered to have been paid evenly throughout the year, so no worries about getting estimated payments in on time.
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I thought growing old would take longer.
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12-15-2018, 05:32 AM
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#3
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,518
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Quote:
Originally Posted by marko
This should be a quickie:
Someone here (redduck?) once suggested that they figure out an estimate of their April Fed tax due. Then at the end of the year, withdraw that amount from their IRA and have 100% withheld.
I'm starting to think that's a good way to go.
Any downside to that idea?
In this market, I'd be likely 'banking' the money (taking it off the table) rather than missing gains for 4 months (as in a normal market).
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Is this the post? http://www.early-retirement.org/foru...ml#post2156534
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12-15-2018, 05:33 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 8,332
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Quote:
Originally Posted by braumeister
Yes, it's a good substitute for estimated tax payments. Don't forget to include the tax on the amount withdrawn from the IRA.
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Ok, thanks. But now that I think it, it would add to my total 'income' for the year by that amount, right? Which could affect my Medicare premiums, no?
__________________
Living well is the best revenge!
Retired @ 52 in 2005
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12-15-2018, 05:38 AM
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#5
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,518
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Quote:
Originally Posted by marko
Ok, thanks. But now that I think it, it would add to my total 'income' for the year by that amount, right? Which could affect my Medicare premiums, no?
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Medicare premiums for parts B and D are subject to IRMAA. See the income tables here https://www.medicare.gov/your-medica...s/part-b-costs
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12-15-2018, 05:40 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 8,332
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Quote:
Originally Posted by MichaelB
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Ok so this was posted as late as yesterday and I completely missed it. DW is right; I am an idiot sometimes.
Mods, you can delete this thread if you want. Redundant.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
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12-15-2018, 05:46 AM
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#7
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,518
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Quote:
Originally Posted by marko
Ok so this was posted as late as yesterday and I completely missed it. DW is right; I am an idiot sometimes.
Mods, you can delete this thread if you want. Redundant.
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Don’t be so hard on yourself. Some topics are hard to search - too many hits. I think pb4uski’s idea is very good and don’t recall seeing it mentioned often, so let’s leave it.
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12-15-2018, 05:54 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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Quote:
Originally Posted by marko
Ok, thanks. But now that I think it, it would add to my total 'income' for the year by that amount, right? Which could affect my Medicare premiums, no?
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Yes, you are increasing your income and MAGI just to have the late years tax withholding option. So be careful and review the consequences.
It works best if you already planned to make that IRA withdrawal to meet RMD or planned Roth conversion, or whatever.
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Retired since summer 1999.
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12-15-2018, 06:42 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,313
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The IRA withholding approach is good. I do the same thing with my Federal pension. I withhold all of our taxes including capital gains, DWs self employment tax, etc. After paying taxes in April I review and adjust. When I sold a second house I bumped the rate up to cover the additional CGs.
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