I'm 65 & made a 401K withdrawal for an RV purchase (no taxes withheld). By when do I need to make a withdrawal to cover taxes without penalties? 12/31/23? 4/15/24?

Forum|Forum|2 years ago
November 7, 2023
1 reply
24 views

Is there a penalty if I don't have enough withheld to cover most of my tax bill?

TurboTax Online

Opus 17

Level 15

If you owe more than $1000 when you file your return, you may owe a penalty for underpayment.

For income received in:	An estimated tax payment is due:
January 1-March 31	April 15
April 1-May 31	June 15
June 1-August 31	September 15
September 1-December 31	January 15

You can make an estimated payment to your account at www.irs.gov/payments. Be sure to select "2023 estimated taxes" from the reason menu.

fanfare

Level 15

You can't make a withdrawal to cover taxes because that would be taxed.

You are in the fourth estimated tax quarter and the estimated tax is due on or before Jan 15 2024 for the end of 2023.

@Wiz222

Opus 17

Level 15

@fanfare wrote:

You can't make a withdrawal to cover taxes because that would be taxed.

You are in the fourth estimated tax quarter and the estimated tax is due on or before Jan 15 2024 for the end of 2023.

@Wiz222

Well, it's a little bit like Xeno's paradox of Achilles and the tortoise.

Depending on the taxpayer's other income and filing status, the tax on a $65,000 withdrawal is likely to be $14,300-$15,600. Assuming they have no ready funds and must make a second withdrawal to pay the tax, a withdrawal of $15,600 will result in additional tax of $3744. Then a third withdrawal of $3744 will result in additional tax of $898. A fourth withdrawal of that amount will result in tax of $215, then $52, then $13, then $4, then $1. But the $898 is less than the threshold for a penalty, so they can probably stop there. A reasonable estimate seems to be that if the taxpayer must withdraw more funds to pay the estimate, they should probably withdraw and send to the IRS about $18,000–20,000, depending on whether they will be in the 22% or 24% tax bracket. That should be close enough or even a little over, and if the estimate is over-paid, it will come back as a tax refund.