RMD and estimated taxes

[dickthompson6]

Where do I report using my RMD for estimated taxes?

[tagteam]

It really does not matter how you pay your estimated taxes.

You report estimated taxes paid in the Estimates and Other Taxes Paid section of the program (located under Deductions & Credits).

[Torrey]

Yes, but I am using my RMD from my IRA In late Nov ‘19 for all of my est taxes for 2019.  Where do I input that on my 1040?  Thank you, Torrey 

[VolvoGirl]

You will get a 1099R for the RMD.  You enter that exactly as shown including any withholding taken out of the RMD.

Then if you send in an Estimated payment directly to the IRS yourself you enter that separately.  You don't have to indicate you used the RMD to pay it.

You can type estimates paid in the search box at the top of your return and click Find and it will give you a link to Jump To it.

OR

To enter Federal or State Estimated Taxes Paid, including a state estimated payment made in January for the prior year, go to

Federal on left or at top.  Personal (Home & Business)

Deductions and Credits at top

Then scroll way down to Estimates and Other Taxes Paid

Estimated Taxes - click the Start or Update button

Estimates paid will be on Schedule 5 line 66 which goes to 1040 line 17.

[VolvoGirl]

You might be asking about form 2210.  If you have a tax due on your return and owe an underpayment penalty you can fill out form 2210 and enter the exact dates you made any estimated payments.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

[Torrey]

Thank you, Torrey 

[Anonymous]

using your RMD to cover estimated taxes is a smart move.  the taxes taken out are considered withholding taxes and the IRS allows allocating them to each quarter despite the actual date the money was withheld.  this is the default and how TT will handle it.  

[rjs]

@dickthompson6 @Torrey (Are you the same person? If so, please stick to one account for the discussion. It's confusing if it looks like two different people are posting.)

You say "estimated taxes" but do you really mean that you had tax withheld from your IRA distribution? Tax withheld from the distribution is not estimated tax, it's withholding, just like tax withheld from a paycheck. Estimated tax is the quarterly tax payments that some people make if they do not have any tax withheld from their income. If you make an estimated tax payment you have to send the payment to the IRS yourself. It doesn't matter where you get the money to make the estimated tax payment.

If you had federal tax withheld from your IRA distribution, the IRA custodian sends the money to the IRS. The amount will be shown in box 4 of the Form 1099-R that you get in January. All you have to do is enter it in box 4 in TurboTax when you enter your 1099-R, just as it is shown on the 1099-R form.

[DFH]

@Anonymous , could you please clarify your statement? 

Are you talking about a situation when someone  hasn't paid enough tax with their four 1040ES submissions and are therefore subject to a penalty?  As I understand it, one can reduce the penalty in the case that they received higher income late in the year than early in the year by reporting income by calendar quarter.

[rjs]

@DFH 

Yes, if you made estimated tax payments and you had higher income late in the year, you might be able to reduce the penalty by using the annualized income method on Form 2210. But it's a lot of work. What HACKITOFF is saying is that you can avoid having to do that by covering your tax with withholding instead of estimated tax payments. Withholding is always treated as having been paid evenly during the year, even if it's actually all withheld in December. As long as the total withholding for the year is enough, you will avoid a penalty altogether.

If you are taking RMDs from an IRA, having tax withheld from your RMD is an easy way to produce enough withholding. It's a lot simpler and easier than using the annualized income method.

If you rely on estimated tax payments, and your payments weren't enough, you are going to pay a penalty. If you had higher income late in the year, you might be able to reduce the penalty by using the annualized income method, but you aren't going to be able to eliminate the penalty. To completely avoid a penalty, you would have to make higher estimated tax payments later in the year to cover the tax on the higher income, and use the annualized income method.

[DFH]

Thanks for explanation.

[168kenn]

I appreciate your response, going forward I will have the custodian of my IRA withhold the taxes. I still have to make estimated quarterly state taxes. TT asks a lot of questions to calculate quarterly (CA only has 3) state payments but does not ask about RMDs. If I add my 2021 RMD to the Federal Adjusted Gross Income in TT's CA Expected 2021form will it provide an accurate state estimated tax? Thanks!

[ColeenD3]

Yes, it should.

[springmisery]

I understand that I can avoid a penalty and not pay estimated taxes throughout the year by requesting that taxes be withheld when I request my RMD, even if it is in December. However, does anyone know if that also applies to Connecticut estimated taxes? I sent in my first CT estimated tax voucher, but would be happy to avoid doing any more and instead just have CT taxes withheld when I take my RMD in December.

[MinhT1]

You can request that your retirement plan administrator withhold CT taxes when they pay out your RMD.

You may also want to contact the CT Department of Revenue on how they treat taxes withheld in December, whether they consider them as evenly paid during the year.

@springmisery

[Edited 04/09/2021  |  7:12 AM PST]