'Late' IRA Distribution

Forum|Forum|4 years ago
March 18, 2022
1 reply
7 views

I am already retired and have calculated that I have taxable income less than the 2021 standard deduction. Since one needs to calculate their 2021 return before they would know how much to withdraw for tax year 2021. I would pay $0 tax on certain sized withdrawl.

One can contribute to an IRA until April, can one still withdraw monies (Mar 2022) from an IRA to count as a 2021 distribution?

BillM223

Level 15

"One can contribute to an IRA until April, can one still withdraw monies (Mar 2022) from an IRA to count as a 2021 distribution? "

Sorry, no, distributions belong to the year in which you actually take them (with the exception of the withdrawal of excess contributions).

And while we're on the subject of trying to match an IRA distribution to a certain amount while staying under the Standard Deduction, you may or may not be aware that the amount of Social Security that is taxable is variable, that is, it's based on the amount of SS income AND the amount of other income you have (like IRA distributions), up to 85% of what you receive..

Thus it can happen that while you withdraw a modest amount and plan to stay under the Standard Deduction, that suddenly more SS is taxable than you thought and you end up owing tax.

That is why I encourage every retiree who is on Social Security to do a test tax return before they give the order for a withdrawal for even a modest amount from their IRA (and certainly this must be done for a large IRA withdrawal).

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Swarley2Author

Level 2

"That is why I encourage every retiree who is on Social Security to do a test tax return before they give the order for a withdrawal for even a modest amount from their IRA"

...and how is that done before Dec 31? Wild-ass guessing on a lot of SS, annuity, DIV, INT and other amounts? One only knows that AFTER putting real numbers into the forms.

VolvoGirl

Level 15

If you need to take the RMD from your IRA it is based on the prior year ending balance, not the current year income. It is a set minimum amount you have to withdraw. You only have the option to take out more. So there is no guessing or testing needed. It's a done deal.

Like for this year 2022 you need to take out a distribution based on your 12/31/2021 ending balance. Your SS and IRA RMD are fixed amounts. You might be able to adjust other kinds of income to affect your tax return like selling investments that aren't in a IRA account.