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You Can Use Your IRA to Pay Estimated Taxes

Last Updated December 21, 2011

If You Missed Estimated Tax Payment Deadlines, You can Use Withholding Tax From Your IRA to Avoid Penalties
 
Withholding from your IRA distribution can be used to satisfy your estimated tax requirements for the year, regardless of the time of year that the withholding occurs.
If you are required to pay estimated taxes, the payments must usually be made on a quarterly basis. Failure to make the quarterly payments may result in your owing the IRS penalties for underpayment of taxes. If you miss the deadlines by which these quarterly payments must be made, you can avoid the penalty by using the withholding tax from your IRA to pay the amount. Under the IRA withholding rules, any amount withheld (regardless of the date of the withholding) is treated as if it was withheld throughout the year. Therefore, if you owe estimated taxes of $1,000 and you request to have $1,000 withheld for federal income tax from your IRA distribution in December, you will be treated as if you have met the quarterly payment requirements. See IRS Publication 505 for detailed information about estimated taxes.

withholdings from IRA withdrawal

Submitted by Anonymous on Fri, 12/23/2011 - 16:55.
Denise Lets carry this one step further. Lets say my estimated tax liability for 2012 is, say, $20,000. As a retiree (early 60s), I normally would pay quarterly estimated payments of $5,000. But could I wait until December, do an IRA distribution of $20,000 and have 100% of it sent to the IRS, and have this meet my 2012 est tax payments? (of course, I'd have to make allowance for this December withdrawal when calculating my annual tax) If I could do this, I wouldn't really need to make any quarterly estimated tax payments....correct? Thanks BruceM