Mandatory tax on ira withdrawals

[kegler123]

For the year 2018 I have ira and sep ira withdrawals that did not take out taxes and some that took both Federal and State taxes. Was there a change in the law at some point during the year.

 

[LdiJ]

For the year 2018 I have ira and sep ira withdrawals that did not take out taxes and some that took both Federal and State taxes. Was there a change in the law at some point during the year.

No, but normally its up to you to tell them to withhold tax. That is part of the paperwork you fill out.

Tax would not be withheld from Roth IRAs.

 

[kegler123]

I always had to do that previously. I do remember that at some point during the year that I was told by my bank and my mutual fund that taking the taxes out of all disbursements was now mandatory in 2018. I do not remember exactly when that happened, but after a point during the year both took it out as mandatory and did not offer me the choice.

 

[davew9128]

It is not mandatory as a matter of law. It may be mandatory as part of their custodial agreement.

 

[LdiJ]

Also, do not assume that the amount they take out as "mandatory" (under their procedures) will automatically be adequate to cover your tax.

 

[Taxing Matters]

It is not mandatory as a matter of law. It may be mandatory as part of their custodial agreement.

It is mandatory in one circumstance: when the distribution is delivered outside the U.S. or its possessions to a U.S. citizen or resident. See the IRS page on Pension and Annuity Withholding. I mention it because so far the OP has not said where he or she is located, and it is possible the OP may reside outside the U.S. and its possession.

Otherwise, I agree it is not strictly speaking mandatory for the taxpayer but the default rule is that the tax must be withheld unless the taxpayer has provided the custodian with a Form W4-P electing not to have withholding. So if no election to be exempt from withholding has been made by the taxpayer it is mandatory for the custodian to withhold. That may be what the bank and mutual fund meant in telling the OP that the withholding had to be done.