This was so helpful. Thanks for putting these together!

@RetirementPlanningEducation

2 жыл бұрын

I’m glad you liked it, thanks!

@kpk1014

2 жыл бұрын

@@RetirementPlanningEducation I was wondering about estimated quarterly tax payments for the IRS in regard to traditional IRA withdrawals. I'm 61 years old. I had no taxable income last year. I am single. I'm about to withdraw $107,050 from my IRA. I'm going to withdraw it in Late July maybe early August. I'm using the money towards the purchase of a house. I did own a house just weeks ago, but my former husband received the house in our divorce settlement. I understand the tax on that will be $34,647.50. My question is can I wait until the new year to pay the tax, or do I have to do quarterly or estimated tax payments, which I guess are the same thing from my understanding? If I do have to do quarterly or estimated taxes I was thinking of waiting until around January 11th, 2023 to pay it if the penalty and interest is less than what the taxes would be on the additional funds I would need to withdraw from my IRA to cover the taxes. TY

At 41:30 (arbitrage/100% withholding question) you state the “damage is already done”. I have read that such 100%-withholding-December RMDs are pro-rata and can FIX prior estimated underpayments. I’ve also read that ANY such 100% distributions (not only RMDs) will also fix underpayments. I’ve seen it called the “erase-and-replace strategy”. Your channel is EXCELLENT. Thank you.

@RetirementPlanningEducation

Жыл бұрын

The "damage is already done" comment was in regards to trying to make a big single estimated payment in December (for a conversion that was done in January). That wouldn't work in that it wouldn't help avoid potential underpayment penalties from having not paid estimated taxes earlier in the year. BUT, withholdings are a different story. They can be made in one big shot late in the year for a conversion early in the year. That can get you to avoid underpayment penalties

@FlaschDJ

Жыл бұрын

@@RetirementPlanningEducation THANK YOU for this CARING, COMPETENT channel. I am 70 and self-employed. Today’s important task is to estimate my TY_2023 income. BTW: My S.E. Income will be only 10k. I desire two options throughout 2023: 1) Optionally, take distributions for living expenses 2) Optionally do Roth conversions. …. This “100% withhold” distribution (December) strategy seems to provide these 2 options while avoiding underpayment penalties. Thank you for pointing out these “100% withheld” distributions are taxable, necessitating what you call “circular math”. Is my summary herein generally accurate? 🙏 🙏 THANK YOU!

@RetirementPlanningEducation

Жыл бұрын

@@FlaschDJ Yep, both IRA distributions and Roth conversions are taxable income. So you have to factor in that taxable income when figuring out what your total tax obligation will be for the year

@FlaschDJ

Жыл бұрын

And, I’ll be able to rectify (avoid penalties on) any underestimation using this year-end “100% withhold” maneuver? Also, how can I learn about private client services, if you offer them?

@RetirementPlanningEducation

Жыл бұрын

@@FlaschDJ If you withhold enough, it's correct there will not be any underpayment penalties. And thank you for your interest, but my business is not taking on new clients at this point

I was invested in stock of a pharma company that was bought by a larger company during 4th Q 2021. I received quite a windfall. How on earth am I to know that would happen and equalize these payments during the year. This penalty system seems very unreasonable. I expected I would pay the sum total of these taxes before April 2022. I always have full intention of paying the lawful amount but I feel like they are jumping out of the bushes on me. TY for any comment. You've done a great service in providing your video!

@RetirementPlanningEducation

2 жыл бұрын

You can "annualize" your income and tax payments by using Form 2210. It's a bit clunky to do, but basically that annualization process is specifically for this situation; lumpy and unknown amounts of income throughout the year. Basically, in the quarter of the windfall, pay estimated taxes based on how much income you have up through then. This "annualization" process gets around having to know the income in advance and splitting it up into four even tax payments.

The joy of fatherhood- weight gain…

Today is April 17, 2024. Two days ago I filed my 2023 taxes. My Total tax (Line 24) was $8,075. I am 71 years old. Am I correct that if, on December 15, 2024, I distribute $8,075 (withholding 100%) from my pre-tax IRA, I will have fulfilled my 2024 tax obligation?

I have a question if I may ! I have SSI income , and IRA(RMD)income. I have taxes withholding in place for that. Recently I have started consulting work from home for which I will earn small income with 1099. Instead of sending quarterly estimated FICA taxes, can I just increase my current withholdings ?

@RetirementPlanningEducation

2 жыл бұрын

Yes, you can use withholdings from Social Security and/or IRA distributions to cover the increase in tax obligation from 1099 consulting income. Not only will you owe ordinary income tax on the net earnings from the consulting, but the FICA tax obligation will be both the employee AND employer portions, which means it's double the FICA tax you'd have to pay if you were instead employed by someone else.

@rdalwani

2 жыл бұрын

Thank you for making it so clear for me. God bless you !!🙏

I don't understand something... I will have social security and work income in 2023. The IRS tool and the table you referred to in Pub 505 will estimate the taxes for my TOTAL income. My wages already have withholding. How do I calculate the withholding to apply to my social security, such that my total withholding is correct?

@andypanko57

Жыл бұрын

You have to look at all of your sources of income and withholdings in aggregate. Add up your total income across wages, Social Security, interest, etc. Then use a calculator like the IRS site to figure out what the total tax obligation will be for the year; that's how much ideally should be withheld in aggregate. If you paycheck withholding at work doesn't cover that aggregate amount, then ideally try to have that much (or close to it) withheld from your Social Security. But you won't be able to get it exact, as there are only four different withholding percentages you're able to have applied to Social Security

@PanamaSticks

Жыл бұрын

@@andypanko57 Thank you.

What about capital gains from securities? How can one pay quarterly tax when trading throughout the year and net gains/losses aren't known till end of year?

@RetirementPlanningEducation

Жыл бұрын

You have to keep track of cumulative realized gains and losses throughout the year as best as possible and factor them into your estimates of each quarter’s total gross income (and tax liability) accordingly. But even then the exercise will often be wrong, especially when you have some unexpected activity later in the year.

@molloarden8938

Жыл бұрын

@@RetirementPlanningEducation Thanks for responding. Having talked to my CFA, I was told that taxes on investment income/losses are not calculated till after the tax year is over when the brokerage house sends out the cumulative gains/losses statement that shows the net total gain/loss. The April return is an annual statement and so are the safe harbor rules, metrics that cannot be reconciled by definition with quarterly metrics.

@RetirementPlanningEducation

Жыл бұрын

@@molloarden8938 Yes, that is largely accurate. Yes, always take advantage of the safe harbor tax withholding/estimated payment rules to minimize or avoid underpayment penalties each year. However, if you had really large income last year (for whatever reason) and this year's income will be noticeably less, the safe harbor rules will require you to potentially make a lot more estimated payments or withholdings than necessary for that year. Or you can try to guestimate your income throughout the year and make make a smaller amount of withholdings or estimated payments based on that. If you're okay potentially overwithholding or making too much estimated tax payments throughout the year (and get it back as a refund when you do your taxes the following Spring), then just rely on the safe harbor rule to withhold or make enough estimated payments throughout the year to cover 100% or 110% of your prior year's total tax (where the 100% or 110% depends on what your total gross income was the prior year).

@molloarden8938

Жыл бұрын

@@RetirementPlanningEducation Correct, we rely on the safe harbor rule and don't try to finesse the quarterly payments as it is too difficult the estimate given the churning in the brokerage account.

If I do an erase-and-replace: Withdrawal from a traditional IRA (100% withholding) and redeposit the withdrawal amount within 60 days (a rollover). Is the redeposit a deductible IRA contribution?

@RetirementPlanningEducation

6 ай бұрын

At most, you'd only be able to deduct the annual contribution limit ($6,500 for 2023 if you're under 50, $7,500 if you're 50 or older). Furthermore, you must be eligible to make deductible contributions; 1) you need earned income for the year and 2) your income and and access to employer plan (or lack thereof) needs to be at a level such that you're eligible to deduct the contribution

@FlaschDJ

6 ай бұрын

Thank you. I’m 70. The amount in question is (only) $2,091. I have $14k gross (9k net) self-employment income. To reiterate (to avoid any misunderstanding): I’m doing an erase-and-replace from a (pre-tax) IRA. I’m withdrawing &2,091 and redepositing $2,091. The redeposit is to the same (pre-tax) IRA. Can I deduct that $2,091 redeposit Sched 1, Line 20 “IRA deduction”? Thank you!

@FlaschDJ

6 ай бұрын

Also: I’ve done no other IRA contributions in 2023. I can still make the full $7,500. I’m self-employed with no access to any employer plans. This account was funded YEARS ago with deductible contributions. I’d guess “not deductible” because I already received a tax deferral on these $2,091 when I first deposited it decades ago.

@RetirementPlanningEducation

6 ай бұрын

Based on what info you provided, putting the money back in within 60 days is an indirect rollover; not actually a distribution and contribution. Hence wouldn’t be taxable (assuming you haven’t already done another indirect rollover in the last 12 months)

@FlaschDJ

6 ай бұрын

⁠@@RetirementPlanningEducationRespectfully, I don’t understand your answer. Could you kindly read my question again? Thank you. I’m asking about deductibility not taxability.

If you are making more than 3% on investments why would you ever pay estimated taxes during the year? And then just pay the 3% penalty?

@RetirementPlanningEducation

2 жыл бұрын

It depends how you segment your money and investments. Generally speaking, any cash needs you're going to have to take from your portfolio in the next year or so probably shouldn't be invested in something that has any chance of losses of nominal value. Which means no stocks and not most bonds, either. There is unfortunately nothing currently out there that can provide a 3% annual return with no risk of principal loss and full liquidity with no penalty. Even high yield savings account are only paying 0.50%. As such, the real opportunity cost of capital in this scenario for most people is well under 1%; not greater than 3%. As such avoiding the 3% underpayment penalty by using cash to pay estimated taxes is likely the better dollars and cents move for most people.

@MyWasteOfTime

2 жыл бұрын

@@RetirementPlanningEducation Thank you!

@marksin515

9 ай бұрын

An old discussion, but still deserves another comment. To rephrase your question, "why not ignore the requirement if you can afford to pay the fine?" I know high net worth people do frequently operate that way, since the penalty is equivalent to a speeding ticket, in that it doesn't stain your reputation. But I would come back at you with: "why pay a fine if all you have to do is get organized?" I love our way of life, but have no desire to over-contribute via my taxes, so I learn the rules for payments and follow them. This year I'm going to do a major upsize in my Roth conversions, and triple my taxes due, at the last minute. Because I knew the rules, my quarterly payments this past year keep me safe, and all I have to do is pay the balance due with my return. No penalties, form 2210 says so. Knowing these rules gives you a lot of power, as any CPA will tell you, I bet.

Whats the penalty rate for 2023?

@RetirementPlanningEducation

5 ай бұрын

1st quarter was 7% and I believe 2nd and 3rd quarter were the same. It went up to 8% for the 4th quarter.

@wattsobx

5 ай бұрын

Yikes! I dont know how its possible but I added extra withholding to my W2 income (also have schedule C) and somehow i paid less in withholdings this year than last year by like 500 bucks so i cannot take the safeharbor im so pissed. @@RetirementPlanningEducation