Question

RMD federal tax witholding

Forum|Forum|1 year ago
March 9, 2025
2 replies
0 views

I will make my first RMD withdrawal this year. Should I have the federal income tax withheld at time of an annual withdrawal or can I wait until I file my taxes next year? Will I pay more if I wait until I file next year or be penalized at all?

M

MinhT1

It is better to request a Federal withholding of say, 20% at the time of withdrawal. Otherwise, you'll have to make an estimated tax payment.

The tax owed on your RMD withdrawal will be the same whether you have withholding taxes or not. The withholding taxes will serve as a credit against your tax liability. If you do not withhold or do not pay estimated taxes, you may have to pay a penalty for underpayment of estimated taxes when you file your taxes.

Please read this IRS document for more information.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

B

Bsch4477

Employee

Have the proper amount of tax withheld when you take your withdrawal this year. The amount withheld will by default be assumed to have been paid quarterly. Otherwise you may be subject to a penalty for not paying tax on a quarterly basis.

M

Mike9241

the rules to avoid federal penalties for underpayment of tax liability for 2025

Withholding and

1) timely estimated tax payments equal or exceed 90% of your 2025 tax or

2) timely estimated tax payments equal or exceed 100% of your 2024 tax (110% if your 2024 adjusted gross income was more than $150K) or

3) the balance due after subtracting taxes withheld from 90% of your 2025 tax is less than $1,000 or

4) your total taxes are less than $1,000

the lower of 1 or 2 is your required annual income tax payments. 1 is difficult to know until the year's end so generally option 2 is the safer option. under the simplified method for estimated tax penalties, 25% of the estimated taxes must be paid in each quarter by 4/15, 6/15, 9/15, and 1/15/ of the following year. unless you can show otherwise 25% of your annual withholding is assumed to occur in each quarter.

failing this and being subject to penalties you can use the annualized installment income method.

if you increase withholding to meet any exception then paying estimates is not required.

form 2210 page 3

https://www.irs.gov/pub/irs-pdf/f2210.pdf

state laws vary

*********************************

some taxpayers, for various reasons, like to receive a large refund so they pay more than required. However, in reality, they are making an interest free loan to the government.