dmertz
Level 15

Retirement tax questions

On an IRA distribution, you can have them withhold 10% by default, request that nothing be withheld or request that more than 10% be withheld.  (Withholding on less then 10% can be accomplished by splitting distributions into two.)

There is no recursive issue when converting to Roth.  You can simply reduce the amount that gets transferred to the Roth IRA so that the total Roth conversion contribution plus the amount withheld for taxes would be the same as you would have otherwise had distributed to you.  In addition, you can even complete the Roth conversion of the amount withheld for taxes by using other funds.  Let's say you want to distribute $20,000 from the traditional IRA or qualified retirement plan to result in 10% or $2,000 of additional tax liability.  Your initial distribution can be to convert $18,000 to Roth and withhold $2,000 for taxes.  Optionally, you can use the $2,000 from savings to within 60 days make a conversion contribution of the $2,000 distribution that was withheld for taxes.  If you do this, the net would be the entire $20,000 converted to Roth and $2,000 of tax withholding instead of $20,000 converted to Roth and $2,000 of estimated tax payments.  Otherwise, you leave it as $18,000 converted to Roth and $2,000 in taxes, still $20,000 distributed.