Beneficiary IRA- tax withhold/taxable transfer?
Hi I have a Beneficiary IRA that I am choosing to take a distribution this year. My current plan is to distribute cash out of the IRA directly to my bank account. I could then re invest that if I choose to. However should I tell my IRA custodian to withhold taxes or not? I am unsure what is the recommended option and my custodian isnt sure either frankly.
Also should I be making the distribution to a bank account? Is it possible to make the distribution to my own IRA to defer taxes even more? Or is that not possible?
Thank you
Permalink Submitted by Alan - IRA critic on Tue, 2021-12-07 21:08
A distribution from a non spouse inherited IRA cannot be rolled over to any type of retirement plan. The withholding decision is up to how you want to pay your taxes. The default rate is 10%, but you could increase it if you wanted to, or you could decline withholding altogether if you have other ways of paying the amount of taxes to avoid an underpayment penalty. You could withhold from other sources, or you could pay quarterly estimates. Since it is very late in the year, you should determine if the amount you have already paid in (or will pay in the January estimate meets your safe harbor to avoid underpayment.