Keep in mind: unless you make 4 EQUAL payments (and it's too late in the year to accomplish that), you can be charged with underpayment even if you paid in 90% of current liability. Better to try and pay in 100% of your estimated liability and, when you prepare your taxes, use the annualized method if income was greater in the second half of the year.
Always one for trying creative solutions (but still well within the borders of the law), would the following work? Make an IRA withdrawal (distribution) to make up estimate shortfall (plus some cushion); Have the IRA custodian/trustee withhold the entire distribution for taxes; Within 60 days, pay into the IRA the same amount as distributed/withheld. Since withholdings (as opposed to estimates) don't have to be evenly spread out during the year, this provides a last minute "fix up" for total estimates/withholding. Since the equivalent amount is redeposited in the IRA within 60 days, the rollover is a non-taxable event, and no penalty. The IRS allows you to do a rollover into the same IRA, so that's not an issue. Of course there is the warning that you can't do this more than once a year, per IRA.
Been there, done that. Not worth the effort in the detailed bookkeeping if there's a better way. Mark Freeland snipped-for-privacy@sbcglobal.net
I seriously doubt the IRA custodian will withhold more than
25% as taxes, but 25% is better than none.-- ArtKamlet at a o l dot c o m Columbus OH K2PZH
Thanks for the reply (which I read as affirmative, assuming that the custodian will honor the withholding request). FWIW, my father used to have 100% of a petty pension distribution withheld. More on point, Fidelity's IRA withdrawal form instructs you to specify for fed withholding a whole number percentage between 10 and 99. So it seems they won't withhold the whole withdrawal, but they're willing to come darn close.
OK - if they will w/h 99% hen go for it.
T`he IRS e-file standards (Pub 1345a) will not allow you to e-file when 50% or more of your gross Form 1099 distribution is withheld as taxes. Not a big deal, just a nasty surprise if you were hoping to e-file.
-- ArtKamlet at a o l dot c o m Columbus OH K2PZH
There is a similar restriction for W-2s. Would anyone care to speculate as to why the IRS imposes these restrictions for e-filing? Bob Sandler
Pure speculation:
The cases where witholding % is 50% or more, are probably rare, and the IRS figures this is more likley to be an ERO typo or fraud, than a correct entry.
-- ArtKamlet at a o l dot c o m Columbus OH K2PZH
They even question legitimate W2s where the withholding is twice as much as the gross income! See
-- Don EA in Upstate NY
The 50% was an arbitrary percentage designed to indicate the possibility that any such W2 just might be fraudulent. IOW they saw in the early days of efiling that most all the cases of EIC fraud included this one indicator. I am amused at it betimes, esp since my own withholding from my pay check from my own corporation can't exceed that in order that I might be be able to efile my own return. Of course I could withhold, say... 70%, and then end of year just go ahead and file on paper, unlike 99% of my clients whose returns are filed electronically. (grin) ChEAr$, Harlan Lunsford, EA, ERO and ET in LA
Do they think that these people are less likely to try to submit a fraudulent return if they have to mail paper? If this is a common fraud indicator, why don't they just put it in their super-secret audit criteria?
-- Barry Margolin, snipped-for-privacy@alum.mit.edu Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***
HAH! You're asking ME how THEY think? (grin
ChEAr$, Harlan Lunsford, EA n LA
Ah, yes, I think that's the answer. It didn't occur to me before. By making the taxpayer mail in a paper return, the IRS forces them to attach a paper W-2 or 1099-R form showing the withholding. If they e-file, all they have to do is key in the made-up numbers. Of course they could prepare a fake W-2 or 1099-R, but that does add a level of difficulty. They can't pick up blank W-2 or 1099-R forms at the post office or the public library. And one of those forms filled in by hand would be an obvious tip-off. They have to find a way to type or print the information on the form. So, yes, they are less likely to submit a fraudulent return if they have to mail a paper return. Bob Sandler
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