Getting the right tax advice and tips is vital in the complex tax world we live in. The Kiplinger Tax Letter helps you stay right on the money with the latest news and forecasts, with insight from our highly experienced team (Get a free issue of The Kiplinger Tax Letter or subscribe). You can only get the full array of advice by subscribing to the Tax Letter, but we will regularly feature snippets from it online, and here is one of those samples…
Withholding on Required Minimum Distributions
Withholding more federal income tax on required minimum distributions from traditional IRAs is a popular tax strategy. Under the federal income tax rules, tax withheld at any point in the year is treated as if evenly paid throughout the year. Some retirees rely on this rule to avoid paying estimated taxes and instead have taxes that they expect to owe for the year withheld from an RMD from a traditional IRA.
In fact, Kiplinger regularly advises retirees who are falling short on their withholding to have more tax withheld from a year-end distribution from their traditional IRAs. Note that by default, the IRA custodian will withhold 10% of the payout for taxes. So if you want more tax withheld from an IRA payout, you’ll need to request it.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Roth IRA Conversions
The above strategy doesn’t work as well with Roth IRA conversions, tax advisers tell us. When you convert a traditional IRA to a Roth, the conversion is treated under the income tax rules as a taxable distribution of the IRA funds to you, and the IRA custodian will by default withhold 10% tax from the converted funds. But understand that the 10% tax withheld is also treated as a distribution to you on which you’d have to pay tax, in addition to the funds you’re moving to the Roth.
And, if you’re younger than 59½ when you do the Roth IRA conversion, you’ll have to wait at least five years after the conversion to withdraw funds to avoid being slapped with a 10% early withdrawal penalty. That’s why experts say to pay the tax owed on a Roth conversion with non-IRA funds and request that the custodian withhold 0% from the converted IRA funds.
This first appeared in The Kiplinger Tax Letter. It helps you navigate the complex world of tax by keeping you up-to-date on new and pending changes in tax laws, providing tips to lower your business and personal taxes, and forecasting what the White House and Congress might do with taxes. Get a free issue of The Kiplinger Tax Letter or subscribe.
-
How Trump's First 100 Days Have Impacted Your PortfolioPresident Trump's first 100 days in office have been busy, with a flurry of executive orders sparking volatility in the stock and bond markets.
-
Should You Donate Money to the Social Security Trust Funds?You can make charitable donations to Social Security, the safety net for older Americans. But will it make a lasting impact?
-
Ten Cheapest Places To Live in FloridaProperty Tax Make your Florida vacation spot daily living — these counties have the lowest property tax bills in the state.
-
Should You Do A Roth IRA Conversion? Nine Things to ConsiderThe Tax Letter Thinking of converting a traditional IRA to a Roth IRA? The Kiplinger Tax Letter Editor highlights nine factors you should consider before making a move.
-
Missed Tax Day? Nearly One Million Taxpayers Still Can File and Claim Valuable Tax RefundsTax Refunds As many as one million taxpayers could be missing out on a significant tax refund.
-
Which Generation Pays the Most Tax in the US?Tax Burden Polls show that most people feel like taxes are unfair. But which age group bears the brunt of the tax burden in the United States?
-
Tax Day 2025: Don’t Miss These Freebies, Food Deals and DiscountsTax Day You can score some sweet deals on April 15 in some select restaurants like Burger King, Shake Shack, and more.
-
Tax Time: Does Your Kid Influencer Owe Taxes?State Tax Some minors are making big money on social media. Here’s how to know if they need to file taxes.
-
Trump Plans to Terminate IRS Direct File programTax Filing The IRS Direct File program was piloted last year in 12 states and has since expanded to 25. But will it last under the Trump administration?
-
How Caregivers for Adults Can Save on Taxes in 2025Tax Breaks Caring for your parent or spouse can be stressful, but the IRS offers tax breaks for qualifying taxpayers. Here they are.
