RMD Taxes on additional amount

[anu0189]

My RMD amount for 2017 was $8,200 but I took additional amount $1,800 that makes total withdrawal amount $10,000. I opted 10% withholding. How my tax will be calculated for the additional amount?

[Hal_Al · Accepted solution]

You're allowed to take out more than the RMD amount, without penalty. The $1800 will be taxed the same as the $8200. It will only be taxed more if the addition to your total income pushes you into the next tax bracket. 

You can use this tool to see the effect of adding income https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

[SweetieJean]

<a rel="nofollow" target="_blank" href="https://turbotax.intuit.com/tax-tools/calculators/taxcaster/">https://turbotax.intuit.com/tax-tools/...>

[anu0189]

Thank you! This is helpful. Usually, for any cash withdrawal from 401k plan there is a 20% federal withholding but fro RMD it is default 10%. So, I was thinking how they will withholding on additional amount. How they will know what is the additional amount? How it will be adjusted later?

[Hal_Al]

That's just the rules. For an RMD you can actually request no withholding. But, for anything more they MUST withhold.
Yes, it's effectively "adjusted later".   No piece of income is taxed individually. All your income, including pension plan distributions, is added together at tax filing time. The tax is calculated on that total (after adjustments, deductions, exemptions and credits). Then withholding is subtracted to determine if you owe more or get a refund.

[dmertz]

Mandatory withholding on a 401(k) distribution that is eligible for rollover (not an RMD) is 20%, however.  You can request that more be withheld, but not less.  An RMD is not eligible for rollover, so mandatory withholding does not apply but *default* withholding of 10% applies.  Instead of the default of 10% being withheld, you can request that nothing be withheld or that more than 10% be withheld.  If you want more than the required amount withheld on a rollover-eligible distribution or an amount different than the default amount withheld on an RMD distribution, you can give the plan administrator Form W-4P or the administrator will provide you with an equivalent way to make the request.

Form W-4P:  <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/fw4p.pdf">https://www.irs.gov/pub/irs-pdf/fw4p.pdf</a>

[anu0189]

Thank you!

[anu0189]

I thought Form W-4P is only applicable to Annuity distribution?  Is it applicable to submit a W4P form with regular distribution?

[dmertz]

"Purpose. Form W-4P is for U.S. citizens, resident aliens, or their estates who are recipients of pensions, annuities (including commercial annuities), and certain other deferred compensation."  "Other deferred compensation" includes non-periodic payments from retirement plans.  See the instructions for Form W-4P.

However, most payers have the equivalent elections on their distribution-request forms.

[anu0189]

Thank you @dmertz ! This is very helpful!

[fanfare]

It is all ordinary income. If your marginal income tax rate is 25% you will probably owe more tax at tax time.

[SweetieJean]

plus State taxes as applicable.

[anu0189]

Got it guys! Thanks!