Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Your Process of Paying RMD Tax?
Old 09-21-2022, 08:48 AM   #1
Thinks s/he gets paid by the post
 
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 2,355
Your Process of Paying RMD Tax?

I have a couple years more to go before RMDs hit. I was just wondering how people are dealing with the inevitable tax "process". Are you estimating the total annual income and paying quarterly taxes? Or do you split the RMD withdrawal between 2 steps. Step one: a transfer of some from IRA to bank account or other investment account and a 2nd step: a 2nd transaction to pay the tax, thus avoiding filing quarterly. Or do you use some other method?

Just curious how others do it.
CRLLS is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-21-2022, 08:57 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 8,727
We pay the safe harbor amount in December by 100% withholding from an IRA distribution. No hassles, no estimating, no penalties. Unless you can't or don't want to pay this way, there is no reason to make any payments during the year. The payment itself, of course, counts against the RMD amount.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 09-21-2022, 08:58 AM   #3
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 46,241
I withdraw enough from the TSP each month throughout the year, in equal monthly payments, to meet RMD requirements (if I don't withdraw enough, my understanding is that the TSP will do it for me at the end of the year). I use this money for some of my living expenses.

Separately, I do quarterly estimated income tax payments which includes taxes on RMD withdrawals, social security, and various other income sources. Then when I do my income taxes, I might get a refund or I might have to pay depending on my estimates.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
W2R is online now   Reply With Quote
Old 09-21-2022, 09:00 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 1,347
Managing my Dad's RMDs (once a year) I just had 10% withheld by Fido.
Going forward we'll probably have to put a finer point pencil to work on it as IRS processing is so backed up we're switching from overkill/overwithholding/get-a-refund to owing just enough not to get a penalty.

My personal accounts will be in the 0% bracket so I don't worry about it.
Spock is offline   Reply With Quote
Old 09-21-2022, 09:05 AM   #5
Thinks s/he gets paid by the post
 
Join Date: Feb 2021
Posts: 1,532
After discussing this with our CPA, I'm going to have taxes withheld from my RMD distribution. That way they just send me the after-tax proceeds and taxes are handled.
disneysteve is online now   Reply With Quote
Old 09-21-2022, 09:07 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 3,406
I do a rough estimate of our tax liability throughout the year. Some of our income (DH's pension, my SS) has withholding, some (interest income and bank promo bonuses) does not.

Then when I take my RMD I see if our withholding is coming close to covering our tax liability at the end of the year. Usually it's going to be a little short.

So when I take my RMD from Vanguard there is an option to designate a percentage to be withheld for Federal taxes. I use this to send what's needed to the IRS and the rest goes to my bank account.

My 1099 from Vanguard will show the total amount withdrawn and the amount withheld.

The first time I did this I did a practice transaction in Vanguard to see all the steps. It was easy and then I did not submit, I cancelled it.

My RMD is not very large and I'm not using it for living expenses so I tend to take it as a lump sum later in the year. Not such a great idea this year!
__________________
Married, both 67. DH retired June, 2010. I have a pleasant little part time job.
Sue J is offline   Reply With Quote
Old 09-21-2022, 09:22 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,250
My mother doesn't have any income flows from which she can have taxes withheld other than her RMD, so what we do for her is calculate the tax that she expects to owe for the year and have that amounithdrawan rather than making estimated payments.

For me, I do something similiar but use my pension for withholding instead of making estimated payments.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 09-21-2022, 10:42 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Feb 2012
Posts: 1,305
We have the safe harbor amount withheld from our year end RMD. We do the inherited IRAs and half of the tIRA distributions in January and have monthly SS and annuity income. Much easier than estimated taxes.
TrvlBug is online now   Reply With Quote
Old 09-21-2022, 11:06 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 6,776
My Dad uses Vanguard's RMD service.

They recalculate his RMD for him automatically.

Every month, on the 15th of the month, they take 1/12th of the RMD amount out of his IRA, withhold federal taxes from it at a percentage rate we choose, and put the rest into his Vanguard taxable account.

Every year, I do his taxes in the spring. I have a note to myself to adjust the percentage rate if needed to make sure he'll meet one of the safe harbor rules. Since his tax situation is pretty stable, it's pretty easy to get things close enough.

I think, but am not certain, that you can configure the RMD service to do monthly/quarterly/annually, which day of the month, which funds to sell, and where to send the proceeds. You clearly can choose any whole percentage for federal withholding.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is online now   Reply With Quote
Old 09-21-2022, 11:51 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Dec 2014
Location: Huntsville, AL/Helen, GA
Posts: 5,857
I will make my RMD in one withdrawal this year. I'll look at last year's taxes on my tax return and project out this year's taxes after the RMD.

I'll have FIDO withhold the federal and state taxes from my withdrawal.
Bamaman is offline   Reply With Quote
Old 09-21-2022, 12:41 PM   #11
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 2,341
I do quarterly tax payments. The first year you need to guess a bit on the amount of each payment. After you file your taxes for the year, you'll have a better idea of what to set up with EFTPS. It's a nice service and your payments don't have to be equal especially if you have taxes taken out by other income streams like Social Security.

- Rita
__________________
Only got A dimple, would have preferred 2!
Gotadimple is offline   Reply With Quote
Old 09-21-2022, 01:52 PM   #12
Recycles dryer sheets
 
Join Date: Aug 2018
Posts: 338
First year for me so a few months ago I did a small distribution from my IRA and from my 401k just to see how it works especially how the taxes are handled. It was very easy and I was able to state the % to withhold for the IRS and state tax from each which was my biggest concern. I'm not withholding any state tax from the 401k, I was concerned there is a minimum 6.99% and that would be way more than I'd owe. I don't trust them to return the overage cuz they are bankrupt.
Graybeard is offline   Reply With Quote
Old 09-21-2022, 01:58 PM   #13
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 23,814
I just had Vanguard withhold the percentage (I forget what it was) that was going to taxes and send that on to the IRS. They don't do state withholding so I just added that to the regularly scheduled estimated state tax payment.
__________________
When I was a kid I wanted to be older. This is not what I expected.
Walt34 is offline   Reply With Quote
Old 09-21-2022, 02:02 PM   #14
Thinks s/he gets paid by the post
Souschef's Avatar
 
Join Date: Dec 2015
Location: Santa Paula
Posts: 3,829
I have withdrawals scheduled through the year. I use EFTPS and the CA equivalent for estimated taxes.
I also schedule QCD;s and gifts to our 4 sons.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
Souschef is offline   Reply With Quote
Old 09-21-2022, 07:29 PM   #15
Thinks s/he gets paid by the post
rk911's Avatar
 
Join Date: Dec 2018
Location: DuPage County IL
Posts: 1,914
Quote:
Originally Posted by CRLLS View Post
I have a couple years more to go before RMDs hit. I was just wondering how people are dealing with the inevitable tax "process". Are you estimating the total annual income and paying quarterly taxes? Or do you split the RMD withdrawal between 2 steps. Step one: a transfer of some from IRA to bank account or other investment account and a 2nd step: a 2nd transaction to pay the tax, thus avoiding filing quarterly. Or do you use some other method?

Just curious how others do it.
we're in a position where we do not need our RMDs so they are going to a Qualified Charitable Distrribution. our gross income does not increase and some of our favorite charities make out.
__________________
Rich
Ham Radio, Sport Pilot, RVer
FIRE: 8/11/2005, age 55y,1d
Administrator for a regional 9-1-1 call center
rk911 is offline   Reply With Quote
Old 09-22-2022, 07:31 AM   #16
Thinks s/he gets paid by the post
 
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 2,355
So many varying responses. Thank you all. I have some time to work it all out.
CRLLS is offline   Reply With Quote
Old 09-23-2022, 03:55 AM   #17
Full time employment: Posting here.
 
Join Date: Jul 2011
Location: Reading, MA
Posts: 864
I've been doing monthly withdrawals from my tax-deferred 403(b) account since age 63, with a certain percentage withheld for Federal and state income taxes.
This year, I'm 72, so those withdrawals magically become my RMD. I adjusted the monthly amount a bit to just cover my RMD amount but left tax withholding as it's always been...
TheWizard is online now   Reply With Quote
Old 09-23-2022, 05:05 AM   #18
Thinks s/he gets paid by the post
Badger's Avatar
 
Join Date: Nov 2008
Posts: 2,640
I have Vanguard automatically send in the RMD once a year. Throughout the year they transfer all dividends from the tIRA MF shares into a tIRA MM account and use that for the RMD. That way my shares remain the same and the cash goes into another taxable MM account for investing or use. They will send in equal amounts throughout the year if I want but one payment is sufficient for us.
It may not be the best way but it works for us. It is simple and all on autopilot.

Cheers!
Badger is offline   Reply With Quote
Old 09-23-2022, 05:12 AM   #19
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 3,945
A good question. I still have 9 years to go. More if the Secure Act passses.
__________________
"The mountains are calling, and I must go." John Muir
DrRoy is offline   Reply With Quote
Old 09-23-2022, 06:07 AM   #20
Thinks s/he gets paid by the post
Golden sunsets's Avatar
 
Join Date: Jun 2013
Posts: 2,394
Like many here, we pay 100% of our taxes out of our RMD in mid December. We track our taxable income closely throughout the year, and purchase H&R Block tax software in a Black Friday deal, so by mid December we have a very good idea of what we will owe, and withhold from our RMD accordingly. The remainder is transferred to our taxable brokerage and used as needed when rebalancing in early January.

Sent from my SM-T510 using Early Retirement Forum mobile app
__________________
"Luck favors the prepared mind"
Pasteur
Golden sunsets is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 3 (1 members and 2 guests)
homestead
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
RMD question on paying taxes street FIRE and Money 13 01-03-2020 01:58 PM
55, 5-year plan to move from high-paying work to low-paying but beloved career 52camellias Hi, I am... 16 02-20-2018 03:28 PM
Did you go BACK to work? What was your decision process? CountryGal Life after FIRE 51 03-17-2017 07:53 AM
Applied for ss - "cannot process your application" SJ1_ FIRE and Money 1 04-03-2014 08:31 AM
Your Thoughts Pls: Paying for Tax Advice instead of for the Tax Return itself? (LONG) Amethyst FIRE and Money 37 02-21-2010 09:49 AM

» Quick Links

 
All times are GMT -6. The time now is 12:47 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.