If at the end of the year, you owe more than $1,000 you will be subject to a penalty unless you qualify for a safe harbor exception. The penalty is currently computed using 3% per year or .25% per month.
I don’t think this is high on their priority list so I would not sweat it.
IIRC, the trigger limit is $1000.
Then you have to submit a letter explaining why it is over $1000.
If they like your excuse your ok.
If they don’t, you will pay a fine that they determine at that time.................
Required Minimum Distributions (RMDs)
IRS Cracks Down on Retirees Who Don’t Take Required Distributions From IRAs
Not withdrawing the full amount will result in a steep penalty.
$1000 is when they assess a penalty and the IRS is the one government agency that will do its job.
Call or visit H&R Block, or IRS or a Tax service.
It’s not expensive and will save you the headaches.
I have the feds withhold from my 401K distribution, usually more than is necessary. It’s a convenient way to do withholding without making quarterly payments. I can see where that wouldn’t be desirable for someone who wants to keep as much money as possible in their 401K
Bookmark— Tax question IRA WITHHOLDING
I’m no expert, but back in the day when I made decent money, I found that as long as you withhold 90% of what you owe every other year, then there was no fine.
Even now, as a part-time, self-employed retiree who withholds nothing, I’ve found the fine to be minuscule, like in the $40.00 range.
At one time, I looked into quarterly withholdings, but that was essentially impossible because my income was so unpredictable, and as I understood it, the penalties were way worse if one attempted quarterly withholding but mis-estimated the amount, rather than simply not doing it at all.
I would suggest running scenarios after you do your taxes (if you do them yourself). Try changing the the file name and then messing with the numbers to see what you have to do in your situation to trigger the penalty. I do that every year on several questions. I also “subtract” $1000 from my income to see how much that saves me in federal and state taxes combined, to see what my effective marginal tax rate is for that last $1k earned. That’s just nice to know information.
Just pay your quarterly taxes.
Just pay your quarterly taxes.
If you’re less than 71 years old, you don’t have to take any distributions - if over 71 you have to take a Minimum Required Distribution each year according to a formula the IRS provides - Fidelity has a handy MRD calculator on their home page if you need one - you don’t necessarily have to have any tax withheld from your IRS distributions as long as by the time you pay your total taxes in April generally you’ve prepaid somehow (withholding, estimated payments, or even having money withheld from your distributions) at least 80% of what you owe.....