Pay estimated taxes for IRA withdrawal

Judy O'ConnorDear Tax Talk,
I took an IRA withdrawal this year. I did not withhold taxes. Can I make a payment before the end of the year for these taxes to avoid a penalty for under withholding? How much in estimated taxes must I pay?
-- Brian

Dear Brian,
Yes, you can make a tax payment using IRS Form 1040-ES, Estimated Tax for Individuals.

Basically, Uncle Sam wants your taxes paid as you earn or receive your income during the year. You may incur an underpayment of tax penalty if you do not pay in enough tax through either withholding or by making timely estimated tax payments.

You can avoid this tax penalty if:

  • You owe less than $1,000 in tax after deducting your withheld taxes and credits, or
  • You have paid in at least 90 percent of your tax for the current year, or
  • You have paid 100 percent of your prior-year tax, whichever is lower.

However, if your 2013 adjusted gross income was more than $150,000 ($75,000 if your filing status was married filing separately), then your withholding-and-estimated-tax payment requirement is 110 percent of your prior year tax liability.

You mention an IRA withdrawal, so be sure to factor in the additional 10 percent tax on the distribution if you were under the age of 59 1/2 and do not meet the exception requirements listed in IRS Publication 590, Individual Retirement Arrangements.

Finally, if you live in a state that has an income tax, be sure to check on estimated tax payment requirements for that state, as they all vary.

Thanks for the great question and all the best to you.

Ask the adviser

To ask a question on Tax Talk, go to the "Ask the Experts" page and select "Taxes" as the topic. Read more Tax Talk columns.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.


Show Bankrate's community sharing policy
          Connect with us


Kay Bell

Protecting taxpayer confidentiality

The New York Times report on Donald Trump's old tax returns included comments from his former accountant. Should he have kept his knowledge of the GOP presidential candidate's returns confidential?  ... Read more

Connect with us