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posted Jun 4, 2019 5:32:03 PM

I am withdrawing $150K from my 401K in April. Can I estimate quarterly payment on that amount only, or must I combine it with my normal income?

I am withdrawing $150K from my 401K in April.  I am 59 1/2 so no penalty.

If I treat the  $150K separate for quarterly payment purposes, there is substantial savings over combining it with my estimated earnings from my job. 

Is it legitimate to treat the taxes this way?

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1 Best answer
Level 15
Jun 4, 2019 5:32:05 PM

When you compute estimates the correct way is to look at the total income for that tax year.

So if not added to the other earnings you would not be computing it correctly.  

Note:  Make sure you also take into account that the wages will have income tax withheld, so you are not paying in that extra amount, however. 

2 Replies
Level 15
Jun 4, 2019 5:32:05 PM

When you compute estimates the correct way is to look at the total income for that tax year.

So if not added to the other earnings you would not be computing it correctly.  

Note:  Make sure you also take into account that the wages will have income tax withheld, so you are not paying in that extra amount, however. 

Level 15
Jun 4, 2019 5:32:06 PM

If you under-withhold, and owe more than $1,000 tax you could be looking at underpayment penalty otherwise, so I like to have a little bit extra withheld so I have a cushion.