Do I have to withhold federal taxes from RMD or can I wait till end of year? Are there penalties associated with 'under withholding'?

[steve07758]

Are there penalties for not withholding fed tax on IRA distribution?

[dmertz · Accepted solution]

You could be subject to an underpayment penalty if you have insufficient taxes withheld and do not make timely estimated tax payments.  For details, see IRS Tax Topic 306:  https://www.irs.gov/taxtopics/tc306.html

[steve07758]

Seems there is an exception IF your distributions are "uneven" (ie. taken in a lump sum at year's end).  IRS form 2210 covers it.  Am I understanding that correctly?

[dmertz]

With uneven income, you can perform the arduous task of reporting on Form 2210 annualized income, deductions and taxes paid.  If your distribution was in the first quarter of the year, this could actually *increase* the penalty rather than decrease the penalty.  If it's practical for you to have withholding taken or to pay estimated tax payments, it's best to avoid needing to annualize.

[steve07758]

Thanks.  You did better than 'Google'.  Well done!