ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
BACKGROUND (you can skip this): I'm starting my 2017 tax review, and realized I fell asleep at the wheel in one area, and did not have enough IL tax withheld (I do this through DW's paycheck). Reason being that for 2016 I went to the top of the 15% bracket with a large ROTH Conversion, and that is not taxable income in IL. Then I based the 2017 withholding on that number.
But this year I filled much of the 15% bracket with some LTGC harvesting (0% tax rate at Fed Level), and that is taxed at the IL State level. So I'm short enough there will probably be penalties.
I've learned (and did this for my MIL, and it worked out nicely), that any withholding from an IRA is treated as if it occurred evenly throughout the year, so you don't need to worry about quarterly payments, as long as that covered the total. So I was thinking I would initiate an IRA withdraw (I'm >59 1/2) of the amount of IL taxes I want to pre-pay, and set it to 100% withholding for IL. This should work. [/BACKGROUND]
The Real Question: Is there any rule I'm missing regarding making a withdraw from my T-IRA just to cover the withholding for IL state tax? I made a ROTH conversion in 2016 and a few earlier years.
I don't think there are any restrictions (like there are on taking money out of a ROTH after a conversion - 5 year rule I think?). I'm talking hundreds of dollars, not over a thousand, so I'm not concerned with paying the 15% Fed tax on that (which has to paid eventually). But man there are a lot of funky rules - am I missing some? Looks like IL underpayment penalty is 10% (on 90% of the underpayment?).
-ERD50
But this year I filled much of the 15% bracket with some LTGC harvesting (0% tax rate at Fed Level), and that is taxed at the IL State level. So I'm short enough there will probably be penalties.
I've learned (and did this for my MIL, and it worked out nicely), that any withholding from an IRA is treated as if it occurred evenly throughout the year, so you don't need to worry about quarterly payments, as long as that covered the total. So I was thinking I would initiate an IRA withdraw (I'm >59 1/2) of the amount of IL taxes I want to pre-pay, and set it to 100% withholding for IL. This should work. [/BACKGROUND]
The Real Question: Is there any rule I'm missing regarding making a withdraw from my T-IRA just to cover the withholding for IL state tax? I made a ROTH conversion in 2016 and a few earlier years.
I don't think there are any restrictions (like there are on taking money out of a ROTH after a conversion - 5 year rule I think?). I'm talking hundreds of dollars, not over a thousand, so I'm not concerned with paying the 15% Fed tax on that (which has to paid eventually). But man there are a lot of funky rules - am I missing some? Looks like IL underpayment penalty is 10% (on 90% of the underpayment?).
-ERD50