RMD Withdrawal Tax Question

[TrvlBug]

In the past, I have always processed our RMD withdrawals as one lump sum in Q4 with all of our taxes withheld from the distribution. In addition to the 1 time RMD, we receive monthly SS and annuity income with $0 taxes withheld from those income streams. My CPA as well as well as posters here have confirmed that this satisfies the taxing authorities with respect to timely tax payments.

My planned change this year is to take about 1/2 of our RMDs in January with NO taxes withheld. The balance will be distributed in Q4 will ALL of our 2021 estimated taxes withheld. Will this still satisfy the taxing authorities with respect to timely tax payments? Thanks much for your insight.

 

[SecondCor521]

Yes, as long as whatever you have withheld in Q4 is enough to meet one of the safe harbors (generally 90% of your 2021 tax liability or 100/110% of your 2020 tax liability).

States also sometimes have payment requirements, so you should check what your state rules are to see how that may apply to you.

 

[TrvlBug]

Yes, as long as whatever you have withheld in Q4 is enough to meet one of the safe harbors (generally 90% of your 2021 tax liability or 100/110% of your 2020 tax liability).

States also sometimes have payment requirements, so you should check what your state rules are to see how that may apply to you.

Thank you. We have our tax man estimate our taxes for the following year based on planned income (he always overestimates!) and that will be the amount withheld in Q4 for both federal and state. Based on past years income, most of the Q4 distribution will be withheld for taxes.