Safe Harbor and tax catchup

[Tom_T]

I withdraw from my IRA every month. I do not withhold much tax, and I have not made any quarterly estimated tax payments. I was planning to use the method, mentioned in the Forum, of taking an extra withdrawal in December with 99% tax withheld.

My question: instead of doing this, can I make an estimated tax payment in December out of cash? Or does that violate Safe Harbor rules?

[toddthebod]

I withdraw from my IRA every month. I do not withhold much tax, and I have not made any quarterly estimated tax payments. I was planning to use the method, mentioned in the Forum, of taking an extra withdrawal in December with 99% tax withheld.

My question: instead of doing this, can I make an estimated tax payment in December out of cash? Or does that violate Safe Harbor rules?

No, estimated tax payments need to be timely or divided equally into 4 quarters.

[lstone19]

My question: instead of doing this, can I make an estimated tax payment in December out of cash? Or does that violate Safe Harbor rules?

No. The safe harbor minimums are actually quarterly minimums. 25% of the annual safe harbor minimum in Q1, 50% by the end of Q2, 75% by the end of Q3, and 100% by the end of Q4. While withholding is assumed to have been equal across the four quarters*, estimated payments are by actual date of payment.

For taxpayers who make all payments by withholding with the default assumption of equal across all four quarters, the quarterly aspect of it becomes irrelevant. But as soon as you make estimated payments, the quarterly aspect is relevant.

* Taxpayers may, at their option and only their option (the IRS cannot force this on you), elect on Form 2210 to use actual date of withholding rather than the equal across all four quarters default. This can be useful when withholding was front-loaded in the year and later in the year estimated payments were made.

[Tom_T]

Ok, thanks. I kind of thought this would be the case.

My income for 2025 will be very predictable, so I think I may go the quarterly estimated payment route. One drawback about having an extra withdrawal in December is that it's additional taxable income, which could have an impact elsewhere.