Bali Hai Again
Active Member
What is the name of your state? New York
First I would like to thank those who have responded to my past tax questions. The information has proven to be invaluable.
My current question is in regards to tax withholding. I have read about tax withholding, whether tax withholding from a job, IRA distribution, RMD or any other funds received and have tax withheld.
From what I gather tax withholding is considered to be timely paid ‘no matter when it occurs’ as long as the tax is paid through withholding and not paid directly to the IRS by the individual, i.e. estimated quarterly payments or other.
For example the entire tax bill for the year (within safe harbor) could be paid by ‘withholding’ in December before 12/31 with no penalty.
Example 1: A person with a job “could” fill out the W-4 and have no tax withheld during the entire tax year, figure the tax owed late in the year and have the employer withhold the proper amount from the remaining paycheck(s) before 12/31. The amount withheld would be considered by IRS to have been paid timely throughout the entire tax year and no penalty assessed.
Example 2: A person “could” take a partial RMD in January and leave the remaining RMD amount in the account to pay taxes in December. The person doesn’t need to pay taxes on other income during the tax year, i.e. SS, investments or other. As long as the remaining RMD taken in December covers the tax obligation, the retired person can have ALL of the remaining RMD withheld by the custodian for taxes. The amount withheld would be considered to have been paid timely by IRS throughout the entire tax year and there is no penalty.
Any comments or thoughts are appreciated.
First I would like to thank those who have responded to my past tax questions. The information has proven to be invaluable.
My current question is in regards to tax withholding. I have read about tax withholding, whether tax withholding from a job, IRA distribution, RMD or any other funds received and have tax withheld.
From what I gather tax withholding is considered to be timely paid ‘no matter when it occurs’ as long as the tax is paid through withholding and not paid directly to the IRS by the individual, i.e. estimated quarterly payments or other.
For example the entire tax bill for the year (within safe harbor) could be paid by ‘withholding’ in December before 12/31 with no penalty.
Example 1: A person with a job “could” fill out the W-4 and have no tax withheld during the entire tax year, figure the tax owed late in the year and have the employer withhold the proper amount from the remaining paycheck(s) before 12/31. The amount withheld would be considered by IRS to have been paid timely throughout the entire tax year and no penalty assessed.
Example 2: A person “could” take a partial RMD in January and leave the remaining RMD amount in the account to pay taxes in December. The person doesn’t need to pay taxes on other income during the tax year, i.e. SS, investments or other. As long as the remaining RMD taken in December covers the tax obligation, the retired person can have ALL of the remaining RMD withheld by the custodian for taxes. The amount withheld would be considered to have been paid timely by IRS throughout the entire tax year and there is no penalty.
Any comments or thoughts are appreciated.