It's really simple.
1) Any tax *withholding* is automatically deemed by the IRS to be evenly applied for the entire year so there is no need to try to do annualized income for estimated tax if withholding covers the tax. The withholding can be on the last day of the year and it still applies to the entire year.
2) A Traditional IRA distribution can (if the financial institution allows it) withhold up to 99% of the distribution for tax which is sent to the IRS and applies to the years withholding.
3) As long as you have not done a previous IRA rollover in the past year, then within 60 days you can roll back the entire amount of the prior distribution. If anything was withheld for tax, that amount can be made up from other funds so that the entire amount is rolled back. (The 'other funds" is the money that was withheld and you would have used to pay the estimated tax.)
4) The amount withheld will then either be returned to you as a refund or apply to your other taxable income.
This little "trick" just takes advantage of the difference between estimated tax (which applies to a quarter unless annualized) and tax withholding that is automatically annualized.
(Same amount of tax paid but treated two differed ways).
[edited for clarity]
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
