Estimated Tax Calculation Method for Quarterly IRA Withdrawals

[CJ29621]

For the past few years I have withdrawn enough funds in January to live off of for the year and held them in an Ally account paying 4% interest. Based on that acton, I would pay the same quarterly estimated Fed and State taxes when due through out the year. For 2025 I'm planning on withdrawing from the IRA quarterly, only what I need for the quarter (about $32,500). I assume that the April payment would be the smallest, then incrementally increase until the January 2026 that would be the largest and that the sum of all four would equal the total tax due.

Based on this method, how are quarterly taxes estimated?

 

[againstthegrain]

Is that "April payment" the tax or distribution?

Quarterly tax payments normally are 4 equal payments, and only adjusted if the tax liability changes significantly during the year.

 

[CJ29621]

Is that "April payment" the tax or distribution?

Quarterly tax payments normally are 4 equal payments, and only adjusted if the tax liability changes significantly during the year.

April would be the first estimated tax payment. I know I could pay an equal amount each quarter (that's what I currently do when I take a full years worth of distribution in Feb) but what if I don't need that amount by year end and just distribute quarterly what I need... how do I calculate the taxes owed each quarter?

 

[againstthegrain]

IME your desire not to overpay taxes, which would then be refunded or credited to you the next year seems like a waste of time for whatever small amount of interest/returns one might get from a "small" tax payment.

Please call your accountant for real advice; mine is just based on a quick ggl, but there seem to be 2 ways to handle it.

Make 3 equal payments and then recalculate for the 4th making sure that the total tax paid covers 90% of your actual income.

Or use the annualized method and file form 2210AI to justify any underpayments. The form 2210AI is described as "horrible."