The RMD Solution to the Hassle of Filing Estimated Taxes in Retirement
If you don't need the money to live on, wait until December to take your RMD and ask the sponsor to withhold a big chunk for the IRS.

Although you probably already filed a tax return earlier this year, you might not be done with taxes quite yet for the year. You may still have to file and pay 2021 estimated taxes. (The next estimated tax payment is due September 15, 2021.)
If you're still working, you probably don't need the worry about estimated tax payments. Withholding on your paychecks should ensure compliance with the tax system's pay-as-you-earn demands. But if you're retired, chances are you need to make estimated payments. You're basically supposed to figure how much tax you'll owe for 2021 and send it along to the IRS in four equal installments.
Pay at least 90% of your 2021 liability or 100% of what you owed for 2020, and you'll have done your duty and be protected from an underpayment penalty. (That 100% of last year's taxes rises to 110% if your 2020 adjusted gross income was more than $150,000.)

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Not only can making those estimates be a pain, writing those checks can disrupt your cash flow. Many taxpayers simply divide the previous year's tax bill by four and send 25% on each payment date to wrap themselves in the "100% of last year's tax bill" exception.
But depending on the source of your retirement income, you may be able to satisfy the IRS via withholding from those payments. Unlike withholding from paychecks, withholding from retirement income is almost always voluntary. (The exception: Non-IRA distributions that can be rolled over tax-free to an IRA or other eligible retirement plan are generally subject to mandatory 20% withholding.)
If you want federal taxes withheld from Social Security benefits, you must file Form W-4V (the "V" is for voluntary) with the Social Security Administration. You can ask that 7%, 10%, 12% or 22% of each monthly benefit be carved off for the IRS. When it comes to pension or annuity payments, you control how much will be withheld by filing a Form W-4P with the payor.
For IRA distributions, the law requires that 10% be withheld for the IRS unless you tell the custodian otherwise. You can block withholding altogether or ask that as much as 100% be withheld.
A Better Way for IRAs
Speaking of IRAs, a little-known opportunity may free you from withholding on multiple income sources and from the hassle of filing estimated taxes. We call it the RMD solution.
Starting at age 72, retirees must take required minimum distributions from their traditional IRAs, based on the balance in the accounts on the previous December 31 divided by a factor provided by the IRS. However, if you don't need the money to live on, wait until December to take your RMD and ask the sponsor to withhold a big chunk for the IRS, enough to cover your estimated tax on the IRA payout and all of your other taxable income for the year.
Although estimated tax payments are considered made when you send in the checks — and must be paid as you receive your income during the year — amounts withheld from IRA distributions are considered paid evenly throughout the year, even if made in a lump sum payment at year-end.
So, if your RMD is large enough to cover your entire tax bill, you can keep your cash safely ensconced in the IRA most of the year, avoid withholding on other sources of retirement income, skip quarterly estimated payments . . . and still avoid the underpayment penalty.
Note that RMD withholding might not work when it comes to state estimated taxes because some IRA sponsors won't withhold state income taxes. Check this point with your IRA sponsor.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.
-
Average Social Security Check by State: How Does Yours Measure Up?
Do you live in this New England state with the heftiest check? Your Social Security benefit can be affected by where you live.
By Donna LeValley Published
-
Portable Retirement Plans: Switching Jobs and Keeping Your Savings Gets Easier
Portable Retirement Plans allow employees to take their retirement savings with them when they change jobs without losing their accumulated savings.
By Kathryn Pomroy Published
-
Why Abolishing Florida Property Taxes is Problematic
Property Taxes A bold proposal that aims to eliminate property taxes in the Sunshine State has roused concerns from economists, and rightly so.
By Gabriella Cruz-Martínez Last updated
-
Five Scary Things the IRS Can Do If You Owe Back Taxes
Tax Law Traveling in 2025? The IRS can take your passport (and house) if you don’t pay your tax bill.
By Kate Schubel Published
-
Early Tax Refund Options Could Trap Your Cash
Tax Refunds Don’t be fooled into thinking you’re not getting a loan — because you really are.
By Kate Schubel Published
-
First-Time Filing Taxes? Key Tax Tips to Know for 2025
Tax Filing Preparing your IRS taxes for the first time may seem daunting, but here are some return preparation and filing tips to start.
By Kate Schubel Last updated
-
Legislation Cracking Down on IRS Tax Refund Mail Theft Advances
IRS A string of bipartisan measures targeting taxpayer refunds, rights, and protections move forward on Capitol Hill.
By Gabriella Cruz-Martínez Published
-
Mail Theft Crisis: Why Your IRS Tax Refund Is At Risk
Tax Refunds Millions of dollars in tax refunds were stolen in the mail last year. Here's what you should know.
By Gabriella Cruz-Martínez Last updated
-
Ten IRS Audit Red Flags for Retirees in 2025
Retirement Taxes Retirees who think they can escape the IRS audit machine should think again.
By Joy Taylor Published
-
States with Emergency and Energy Sales Tax Holidays in 2025
Sales Taxes Save on appliances with a state emergency preparedness or energy-efficient tax-free weekend in February.
By Kate Schubel Published