How do I correct not withholding funds from an ira withdrawl

Forum|Forum|7 years ago
June 1, 2019
8 replies
1 view

I had to pull my funds from a simple IRA and had planned to have them withhold 35% (10% penalty & 25% income tax) but then he asked me how much I wanted to withhold for state. I hadn't researched how much I would have needed to withheld and after speaking with him, he assured me that I could just hold onto the portion I thought I would owe and pay during next tax season. Now at home reading up and I'm seeing that there could be an underpayment penalty added on as well. How do I go about making an estimated tax payment to the irs so that I don't acquire any additional penalties? The amount I pulled out will not put me into the next tax bracket. I've never owed money before, always have received a tax refund. I saw some stipulations of lesser value of 90% this year or 100% of last year. Didn't quite understand that.

TurboTax Deluxe Online

Best answer by

When you calculate your return and enter your 1099-R, the penalty and taxes on your withdrawal will all be handled on your personal return. You don't need to worry about making these payments separate. You'll see the additional tax on line 59 of form 1040; otherwise the income taxes are combined.

Anonymous

If you entered everything in the software do you have a penalty? You can owe up to $1000 in tax and not apply the penalty. Also, as long as you've paid in 100% or 115% of last year's tax there's no penalty.

blaviddobrieAuthor

Level 2

Unfortunately I didn't do this last year. I've already filed my taxes and everything is in order and I'm awaiting my return. I did this today and it will be on next years tax return. My wife and I's total federal withholding is about 14k for last year and we didn't owe taxes. I pulled 22.8k today, and since we won't be going up to the next bracket I assume we'll owe 35%, not including state? Will I be penalized further for not paying that now and waiting till next tax season?

langleshop

Level 2

If I understand your question, you did withhold for federal taxes, but not state taxes. That is not an issue for the IRS which is federal taxes only. State taxes would be handled by your state's department of taxation. You should be able to read up on underpayment penalties on their website.

blaviddobrieAuthor

Level 2

I did not withhold any amount, I will be receiving the full amount on a check in the mail come tomorrow. Figuring that I could just put what I assumed I would owe in a savings account and pay it during the next tax season. I'm trying to avoid accruing any additional penalties besides the early distribution of 10% such as under withholding by making some sort of estimated tax payment if its necessary.

Anonymous

I wouldn't recommend calculating the percentage on straight income because you get all sorts of deductions, it's rare for that to be close. You can use a turbotax account to just enter it and update the state to see. States typically have similar leeway as to the federal - so if you've paid in 100% of last years state "total tax" (or 115% if income over 150k), then there's often no penalty. I agree with the other recommendation, if you search your state site you can find some info, but there's not enough information provided to say. You can run the calc in turbotax, even just with estimates, update the state and see where you're at. TurboTax will handle the penalty and tell you if it applies.

blaviddobrieAuthor

Level 2

ok, I understand now, use my copy of turbotax to see a mock setup. How do I do that though, I've purchased the online version.

Anonymous

Well if that's the case, I'd say just enter your actual. I thought you seemed like you were waiting on some information. But if you're saying you've done this, did you update the state? You've got all your information?

Anonymous

Answer

dmertz

Level 15

The intent is to avoid an underpayment penalty by making the payment for the same tax quarter as the tax quarter in which the income was received, not to pay the tax and possible penalty with the tax return.

Once that you've determined using simulated tax returns that you might be subject to an underpayment penalty, to make a state estimated tax payment, go to your state's website to find the information on making an estimated tax payment. You can also consider increasing your state tax withholding from other sources throughout the year to make up the difference.