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IRA Withdrawals and Taxes

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kream

Junior Member
What is the name of your state? Pennsylvania

This question is from my mother, who will be turning 70 in January. She will need to begin taking payments from her traditional IRA by age 70 1/2. The question is: how much tax will be withheld from her IRA distribution checks? She had heard 10% or 15%. I researched, but could not find an answer. Are there tax tables available for IRA payments? Thanks for your help.
 


LdiJ

Senior Member
What is the name of your state? Pennsylvania

This question is from my mother, who will be turning 70 in January. She will need to begin taking payments from her traditional IRA by age 70 1/2. The question is: how much tax will be withheld from her IRA distribution checks? She had heard 10% or 15%. I researched, but could not find an answer. Are there tax tables available for IRA payments? Thanks for your help.
She should determine herself how much tax should be withheld, based on her overall tax situation....just as an employee does when they fill out a W4.
 

abezon

Senior Member
Generally, the IRA owner has the option of having no withholding, or 10%. Contact the IRA trustee/administrator to ask what they will do. If grandma has a regular tax pro, set up an appointment to determine if she'll need to have any withholding.

Also, if grandma makes charitable donations, she can instruct her IRA trustee to send her withdrawal directly to a registered charity. If she does, she meets her required minimum distribution for the year AND does not have to declare the IRA withdrawal as income on her own return. (She can't deduct the contribution, since she already excluded it from income.) This is much better than, say, withdrawing $5,000 & gifting it to the ASPCA. Withdrawal & gifting means she has to pay taxes on the $5,000. It might also increase her taxable social security. And, since her standard deduction will be about $6,500 in 2007, she may not even benefit from itemizing.

You'll need to contact a local tax pro for advice regarding Pennsylvania taxes.
 

LdiJ

Senior Member
Generally, the IRA owner has the option of having no withholding, or 10%. Contact the IRA trustee/administrator to ask what they will do. If grandma has a regular tax pro, set up an appointment to determine if she'll need to have any withholding.

Also, if grandma makes charitable donations, she can instruct her IRA trustee to send her withdrawal directly to a registered charity. If she does, she meets her required minimum distribution for the year AND does not have to declare the IRA withdrawal as income on her own return. (She can't deduct the contribution, since she already excluded it from income.) This is much better than, say, withdrawing $5,000 & gifting it to the ASPCA. Withdrawal & gifting means she has to pay taxes on the $5,000. It might also increase her taxable social security. And, since her standard deduction will be about $6,500 in 2007, she may not even benefit from itemizing.

You'll need to contact a local tax pro for advice regarding Pennsylvania taxes.

I have many clients who have more than 10% withheld from their IRA distributions.
 

efflandt

Senior Member
According to IRS pub 590 withholding for non-periodic distributions is typically 10% by default (unless you chose no withholding). Although, an eligible rollover distribution is subject to manditory 20% withholding (unless directly transferred trustee to trustee).

Required minimum distribution might be considered a periodic distribution, so withholding may be based on the number of withholding allowances claimed on Form W-4P (3 by default if that is not filed). See Form W-4P anyway.
 

LdiJ

Senior Member
According to IRS pub 590 withholding for non-periodic distributions is typically 10% by default (unless you chose no withholding). Although, an eligible rollover distribution is subject to manditory 20% withholding (unless directly transferred trustee to trustee).

Required minimum distribution might be considered a periodic distribution, so withholding may be based on the number of withholding allowances claimed on Form W-4P (3 by default if that is not filed). See Form W-4P anyway.
Which was my whole point. Someone should NOT go with default withholding, they should specify withholding based on their specific tax circumstances.
 

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