Are tax withholdings counted as part of RMD?
I already closed out an IRA CD account that was maturing in December to take part of my RMD for 2024. During the exchange with the custodian, I agreed that they should do 10% withholding for federal taxes. The total in the account was 16k and 1.5k went to the tax withholding, and the remaining $14.5 into my taxable account. Did I just take a $16k RMD or $14.5k RMD?
I’m confused because I need to take the remaining RMD of about $10k from another IRA account which will have a significant remaining balance. When I went online to specify the $10k withdrawal from that IRA account, the custodian site asked if I wanted to do the 10% federal tax withholding. When I said yes, it calculated an $11k withdrawal. Shouldn’t the withholding have been calculated within the $10k total withdrawal rather than on top of it?
Permalink Submitted by Alan - IRA critic on Wed, 2024-12-25 14:24
The total gross distribution which includes any withholding is applied to the RMD. Therefore, the first distribution accounted for 16k of your RMD.
The second custodian site should not have grossed up your 10,000 to reflect withholding. If your remaining RMD is 10,000 and you request 10% withholding, you should receive 9000.