Thursday, July 2, 2015

A quarterly tax headache


DEAR HARRY: My question relates to estimated federal income taxes (Form 1040-ES). I am retired, and I have filed estimated tax returns because of my interest and dividends. I find this tough to have to deal with on a quarterly basis. Can I avoid doing this by having enough tax withheld from my Required Minimum Distribution from my IRA? I take my entire RMD in December. Does this make it more difficult? I don't mind paying taxes; it's the penalties and interest that I hate. I filed a 1040-ES for this year and made my first quarterly payment. My tax preparer said that I'll get hit with a penalty if I make the change. Help!

WHAT HARRY SAYS: Good news: Your tax preparer is wrong. The tax withheld will be deemed to have been paid ratably through the year so there will be no penalty. Since you already made a payment, take enough out of your RMD to get your total tax amount at a couple of bucks above your 2013 taxes. There will be no penalty and no nuisance with the remaining quarterly 1040-ESs. I have suggested this method to a number of retired friends who have been doing it this way, and all are pleased. A similar situation can be had with RMDs that are taken monthly or quarterly. Incidentally, taking your RMD at the end of the year keeps the "government's money" working for you.


Email Harry Gross at, or write to him at Daily News, 801 Market St., Philadelphia, PA 19107. Harry urges all his readers to give blood. Contact the American Red Cross at 800-Red Cross.

Daily News Personal Finance Columnist
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