RMD and Tax paid
I am 70+ and will take my first RMD from my R/O-IRA in December, 2015. I must pay taxes on the amount taken. Is the amount paid in taxes considered part of the RMD? In other words, if the RMD for the year is $20,000, can I consider the distribution plus taxes paid on it as the total RMD as long as the total equals $20,000?
Many thanks for all that you do!
Permalink Submitted by Jeff Watkins on Tue, 2015-10-20 21:14
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Permalink Submitted by Alan - IRA critic on Tue, 2015-10-20 21:30
Yes, the entire distribution including the tax withheld (federal and/or state) is credited against the amount of the RMD. Note that if your RMD is large enough to cover your entire tax bill you can eliminate paying quarterly estimates. Withholding is deemed as being paid throughout the year, so even a December withholding is treated as if you paid the taxes in each quarter. Also, note that your first RMD only includes the flexibility to defer all or part of the first RMD until as late as 4/1 of the following year. Due to the way SS income is taxed, sometimes you can save on total taxes for both years by taking less than your full RMD in year one. But crunching the numbers to find the best split takes a tax program and a good knowledge of your taxable income for both the first RMD year and the following year.