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If you have an IRA that you can pull money from without incurring a penalty, then you can have 99% or 100% of a distribution from that IRA withheld to qualify as withholding to avoid a penalty.


As AJ said, the payment has to be from withholding. A lot of retirees don't have anything withheld from pensions, SS, etc, and just do one large IRA withdrawal with 100% withheld late in December. Large enough to satisfy the Safe Harbor to avoid the penalty.

Until I discovered this trick a few years ago, I was always trying to get my pension withholding right. And was never able to. I cycled back and forth between way too much and way too little.
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