Ask Terry Questions Need to submit estimated taxex

Need to submit estimated taxex

By Terry Savage on February 05, 2024 | Taxes & Economy

Will you pay a tax penalty for not submitting estimated taxes if you take one large distribution from your IRA in December and have at least 20% withheld? I have 22% withheld from my social security monthly but this will not cover my taxes since I will be taking a large distribution (about $60,000). I have been told differing answers about this issue. One says that my December distribution will be annualized and the other answer says I have to submit quarterly estimated taxes or pay a penalty. Which is correct? Thanks!

Terry Says

You can take a huge withholding from your IRA distribution, but if you only took 20% withholding it might not be enough to cover the taxes due, depending on your tax bracket.
So yes, it can be done– but did you do enough?

Consult a tax professional. You’re probably safe if this is the first time it you took your RMD. You can certainly avoid a penalty if you paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.

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