RMD Required Minimum Distribution (Not withholding the taxes )

[Framboise]

I don’t want to withhold the taxes directly from my qualified retirement plan distributions because the stocks are low right now, in November.

How to do when I file my taxes with Turbo Tax? Just add the amount of the RMD as a regular income in my Turbo Tax form?

[dmertz]

As with any distribution from a qualified retirement plan, the plan will issue a Form 1099-R that must be included on your tax return (by entering it into TurboTax) so that the actual tax liability resulting fro the distribution can be determined.

Tax withholding is nothing more than a down-payment toward the overall tax liability determined on your tax return.  Tax withholding does not apply to any particular item of income on your tax return even though the amount might have been be calculated based on a particular item of income.  In the case of an RMD, which is not eligible for rollover, the tax withholding can generally be any amount you desire and will be credited on your tax return.

[VolvoGirl · Accepted solution]

Is this your first RMD?  I suppose you want to take the full RMD and use it to buy stocks.  Then  pay the taxes when you do your tax return?   You will get a 1099R form for it in January or Feb to enter into your tax return.  It will also have codes you need to enter into your tax return.  It will increase your income so be sure to have enough withholding or estimated payments to cover the extra tax so you don't have a underpayment penalty.  

[dmertz]

Good point.  The tax liability resulting from the distribution is the same whether taxes are withheld or not, so there must be some other reason not to have taxes withheld (i.e., needing the cash for something else in the short term).

[Mike9241]

there is a potential downside to not having taxes withheld, which is an underpayment of your estimated tax penalty.

There will be no federal penalties for not paying in enough taxes during the year if withholding

• And timely estimated tax payments are equal to or exceed 90% of your 2022 tax

or

• And timely estimated tax payments are equal to or exceed 100% of your 2021 tax (110% if your 2021 adjusted gross income was more than $150K)

or

• the balance due after subtracting taxes withheld from 90% of your 2022 tax is less than $1,000

or

• your total taxes are less than $1,000

state laws differ

[fanfare]

Contact the custodian to understand the minimum amount of withholding.

For example,

With my TD Ameritrade IRA the minimum federal is zero.

With my Fidelity 401k they came up with a strange amount of less than 10%,

I don't know how they calculated that but for me it was no complaints.

@Framboise 

[Framboise]

Thank you SO MUCH to everyone who answered my question. I now understand how to do.

I have a second question:

Is it possible to pay in four installments with vouchers and how do I get them? Here is what I found on the internet:

“Tax law requires the payment of income taxes throughout the year as you earn income. This obligation can be met through quarterly estimated tax payments, 

The IRS provides payment vouchers to people who make estimated tax payments, and they are due April 15, June 15, September 15, and January 15 of the following year for the first, second, third, and fourth quarters, respectively.”

[VolvoGirl]

Here's the estimate forms and instructions for 2022.  You would only need the 4th quarter payment slip. 

https://www.irs.gov/pub/irs-pdf/f1040es.pdf 

Or You can pay directly on the IRS website https://www.irs.gov/payments

Be sure to pick the right kind of payment and year.....2022 Estimate