Tax Lawyer, Carteret County, Morehead City, and Beaufort, NC
Andrew G. Foster, attorney with Harvell and Collins, PA, received his Masters in Taxation (LL.M in Taxation) from the University of Florida in the year 2011.
Estimated tax penalties can be a trap for retirees who have been accustomed to withholding paying their tax bill throughout the year. The general rule is that if the retiree expects to owe more than $1,000 in federal income taxes that are not prepaid through withholding, then quarterly estimated tax payments are required. The first quarter's payment is due by April 15. The other three payments are due June 15 September 15 and the following January 15. The key for a retiree is that regardless of when you take the Required Minimum Distribution during the year, as long as there is enough tax withheld to at least to ensure you will not owe $1,000 or more then there will be no penalty. The reason for this is because withholding is deemed to have been paid evenly throughout the year regardless of when it is actually paid.
If you are a retiree who receives distributions from retirement accounts such as an IRA, 401(k) and the like, you should “pay the taxes when (you) take the distribution.” As long as these taxes are withheld from the distribution, you will not have an estimated tax penalty. Just be sure to check your withholding to make sure that you have enough to cover the tax owed. Also check to insure that you have state income taxes withheld in addition to the federal taxes.