The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies

URL:  https://boards.fool.com/now-when-i-make-any-changes-in-my-taxable-34552688.aspx

Subject:  Re: Paying taxes in retirement Date:  7/6/2020  2:02 AM
Author:  foo1bar Number:  130846 of 131136

Now when I make any changes in my taxable accounts, I have no regular means to make tax payments over the year and seems to force me into estimated payments

You may not have to make estimated payments.
If the taxes that are withheld are at least 100% of the previous years income tax (110% if AGI > $150K for MFJ) then you fall in the "Safe harbor".
If you are in that safe harbor (or one of the other possible safe harbor cases) you still will owe the taxes and have to pay them when you file your taxes the following year. But you won't owe any interest or underpayment penalties.

SO - if I were in your position, I'd probably NOT make estimated payments (nor have money taken as withholding from may taxable account). Instead I'd make sure my RMD's withholding would be enough to put me in the safe harbor. Then come April 2021 I'd pay whatever additional amount I'd owe when I did my taxes for the 2020 year. Even if I only get 0.5% interest on that money from now until April 2021, that's still a few bucks more in my pocket.

But if you want to pay the IRS estimated taxes - or do some additional withholding, you can certainly do that.
AFAIK there's nothing that prevents you from making multiple estimated tax payments so you could even do it as a pay-as-you-go thing, sending the IRS a check (or ACH) every month, covering the taxes you guesstimate will be the result of your portfolio changes that month. (it wouldn't be my choice or my advice to do that - but you can do that if that makes you sleep better at night)
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us