Tax on IRA distribution

[kashblack1953]

I have been taking regular distributions from my IRA over the course of the year and have had taxes withheld from each distribution. At the end of the year I took an additional larger distribution to fund a real estate purchase, with nothing withheld from this distribution. I then figured our total income, subtracted our various deductions and estimated the remaining tax owed after accounting for withholding (tried to use TurboTax, but 2024 TurboTax was too incomplete to do anything meaningful) and made an estimated tax payment to cover the remaining tax owed. This is the only estimated tax payment I made this year. I tried to do the right thing, am I ok in the eyes of the IRS?

[fanfare]

You will have to use Form 2210 Schedule AI to determine the amount of penalty, if any.

@kashblack1953 

[MaryK4]

Without knowing the exact amounts, it is difficult to say for sure, but if you did not incur penalties for underpayment of the estimated payments in the past, you should be okay.  There are exceptions to the penalty that TurboTax will be able to walk you through- even if it still applies, you can ask for abatement because it is a rare situation.  

See Underpayment of estimated tax by individuals penalty.

 

[kashblack1953]

Hope I don’t owe anything, paid everything I believe I owed shortly after taking the distribution. How should I handle this in the future to avoid problems?

[fanfare]

you only get one aboatement request ; it is not an unusual situation.

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IRS expects you to pay-as-you go, throughout the year.
Form 2210 Schedule AI is intended for your situation.

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What is your 2024 tax ? (You will know soon, if not already). Do you have withholding taken in 2025?
If your total 2025 withholding alone is 100 % of that amount ( 110% if your 2024 AGI is over $150,000),

You don't need to make estimated tax payments. This is the prior year's tax rule.

If you got a 2024 refund this year and 2025 earnings are comparable then your 2025 withholding may already meet the prior year's tax rule.
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If no earnings, a possible action is to make sure your withholding instruction to custodian on IRA distribution specifies the needed withholding to satisfy the above rule.

@kashblack1953 

[Hal_Al]

Q. How should I handle this in the future to avoid problems?

A.  Have the tax withheld from the distribution.

Withholding is treated as being paid equally throughout the year. Quarterly payments are only treated as paid when actually paid. 

A common technique for retired people who must take Required Minimum Distributions (RMD) is to have all their federal withholding done when they take their RMD, usually late in the year.