Withholding question concerning IRA MRD

I have a question about federal and state income tax withholding. My wife and I live in Minnesota. My wife and I are retired, so we have no wages. My wife and I receive Social Security, some dividends, some interest and a small pension which no money withheld on any of these sources of income. My wife and I both are over 70 1/2 years old and have to take RMD’s from our traditional IRA’s. My question is: If I take our RMD’s in December, will that meet the income tax withholding requirements if I have enough withholding taken out at that time (late in the year) for ALL the sources of revenue including, Social Security, dividends, interest, pension and the RMD? In other words, will withholding from the RMD satisfy the withholding requirements for all the income received throughout the year without any under withholding penalties, assuming I take enough withholding to satisfy the total income tax we owe for the calendar year? I called both the IRS and the state income tax department and they can’t or don’t want to answer my question. Isn’t it a shame the government can’t answer a simple question since they are supposed to be knowledgeable in tax matters.
Thanks for any help with this.



Short answer Yes. Withholding is deemed to have occurred equally throughout the year even if you take the distribution in December. In fact, you do not even have to cover your full tax liability. To meet a safe harbor from any underpayment penalty your withholding only needs to equal your 2016 tax liability. Many seniors do exactly this in order to avoid making quarterly estimates. Most IRA custodians will allow you to select your withholding %, usually to the nearest whole % number. If you do nothing, the default withholding rate is 10%, probably too low for covering your safe harbor amount. This will probably work for most state income taxes also, but there may be a couple exceptions such as not offering state withholding in certain states.



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