Withholding on IRA distribution

[JON]

on over 60 year old - is that considered drawn equally drawn throughout the year like W2 withholdings?

[gkaiseril]

For what purpose?

If it is for the underpayment penatly computation, no.

[Jesse]

I'm not 100% sure

but I thought it is considered the same as W-2 withholdings in the computation of the underpayment penalty.

Edit:

I found this from a seminar I attended but have no direct cite for the information.

To avoid an underpayment penalty:
If you look like you’re faced with this underpayment penalty, one strategy is to adjust your income tax withholding. Withheld income taxes are treated as if you had paid them evenly throughout the year. So if you find you won’t meet one of the exceptions for avoiding a penalty, extra tax withholding on other sources of income, such as IRA distributions or pension income, at year-end can make up for underpayments during the early part of the year. You may also try to increase the taxes deducted from year-end paychecks.

[DaveO]

I recall reading about a penalty avoidance strategy in Bottom Line using IRA withholding. In the scenario described a person behind on their withholding at the end of the year could take a distribution from an IRA and have the entire amount withheld as tax. Then, after the first of the year and within 60 days of the distribution redeposit the money into the IRA to avoid a penalty. I would think this could still generate a notice for the withdrawal.

[gkaiseril]

The 2210 form says "Withholding Taxes', so if the financial institution withholds the taxes and reports them on form 1099-R it is is considered as "Withholding Taxes' for the 2210 computation. This would also apply to withholding on 1099-Int, W2-G, etc. Also include any excess FICA or RRTA. If you have any withholding on a 1041 also include that amount.

From the 2210 instructions page 3:
Line 6
Enter the taxes withheld from Form 1040, lines 61 and 69; Form 1040A, line 38, plus any excess social security and tier 1 railroad retirement tax (RRTA) included on line 44; Form 1040NR, lines 58a, 58b, 58c, 58d, and 63; or Form 1040NR-EZ, line 18. For an estate or trust, enter the amount from Form 1041, line 24e.

[JON]

Thanks guys

I to read the 2210 and thought you could do it, but I felt it was to easy.. I do it with year end bonuses to catch up, but I have never do it with IRA distribution before. I will tell him to go ahead I cannot find anything to prevent it from being considered withheld throughout the year.

[appelman]

I would think it might be questioned if too flagrant.

On the other hand, someone would have to dig pretty deep to find out.