A differeent topic: anyone is withdrawing funds from pension funds?

[question everything]

We do, RMD from IRAs and it appears that we now have to fill a new form

2022 W-4MNP and to send it to the financial institution to either withhold tax, or to opt out.

When we take funds from the Vanguard there is a place for federal tax withholding and we always select it. But there has never been a place for state withholding so we send quarterly estimated tax to the state.

Something new, started with Jan 2022 but we just now got an email from Vanguard...

Oh well..

[gab13by13]

1. All states are not the same.

Pa. does not tax pensions or 401k withdrawals, other states do.

[in2herbs]

2. I have 25% taken out for state and federal taxes (which I only pay at tax time in April.) Haven't

had to fill out a new form as yet.

[progree]

3. That's odd. Isn't there a checkbox at Vangd where one can choose the default percent or put in

a different percent or none when doing an RMD or Roth conversion? Why would they need a form when one has got that?

[question everything]

4. There is, but only for federal. I have not seen one for the state.

Obviously it will have to accommodate all the states that do tax these payments.

[progree]

5. Well, I guess I'll have to wait and see. I would hate to have to commit to a certain

percent in advance. Usually I don't do any withholding for IRA RMDs at Fidelity or for any Roth conversions at Vanguard because I have already covered that in my estimated tax payments (or I'm relying on a safe-harbor provision like paying estimated taxes equal to 100% of the prior year's taxes or somesuch).

But a couple of times it has been convenient to do the withholding at the time of the RMD or conversion -- as any such tax withholding is treated as occurring equally over the entire tax year, even though I always do the RMD or conversion in December.

[h2ebits]

6. It depends on the institution and the state. . . .

and on your estimated annual taxable income.

I have an IRA at Vanguard, also. I currently don't pull any RMD monies out of it because I also have an IRA Annuity that provides monthly income and is over the required amount of RMD withdrawl so Vanguard will sit there until needed.

When I actually spoke to a Vanguard representative a few years back about the RMD, I was advised that they would withhold for federal taxes but they did not withhold for state taxes because all of the states are different. Perhaps they have changed their policy at this date.

My IRA annuity has always withheld for both state and federal taxes.

Social Security will withhold for both federal and state taxes but only at the percentages they allow. ie. federal 10% withholding and state, I believe is like 5%

Hope this helps.

[question everything]

7. Thank you. Yes, it is Minnesota that established this requirement and today

i received an email from Vanguard that if I don't take any action they will have to start withholding the Minnesota min. rate.

Or i can fill and mail that form to keep 0% state tax.

From the Minnesota Dept of Revenue page this became effective Jan 22 so I don't know why it took so long.

I take the RMDs in 12 installments so still have to take the Dec one.

[question everything]

8. I thought I was going out of my mind

I sent Vanguard the form and after a couple of weeks messaged them asking whether they got it. No reply for two weeks do I called last week: yes they had it. Today they also finally replied to my message.

So, I decided to withdraw the last of the RMD and... I could not continue. There was a red square telling me that I had to select the Minnesota withholding: percentages, min. rate, dollar amount and one more.

So I called, thankfully I was not on hold, but frustrated. The rep, mumbled something about minimum rate of 6,75% and the clock was ticking to the close. Then he had a suggestion: put $0.00 in the dollar field and that did it. I should have concluded this on my own...

And I completed the transaction two minutes before the market closed.

[progree]

9. I don't have an RMD requirement with Vanguard, thankfully,

But I did get a letter from Vanguard to download the form, fill it out, and snail mail it in. So I did so. (I plan a Roth conversion at Vanguard before year end, and that will involve paying taxes and tax withholding and all that, so now I'm getting nervous. Shoot I'd better get going on that soon as we're in December's 2nd trimester already, approaching December's midpoint).

I do have an RMD requirement with Fidelity on my inherited IRA account (RMD's are required on inherited IRAs no matter what age one is). They haven't said a freaking word about any of this. Now I'm really getting nervous. Fortunately I have the amount figured out (though want to do a little more work to decide whether to do a little more than the RMD to clean out one of the two accounts, and that involves forecasting my taxes enough to see what rate bracket I'll be in, sigh. Maybe do the RMD right away and later do any "extra" when I figured that out. The world won't end if I don't do the "extra" in time).

Then he had a suggestion: put $0.00 in the dollar field and that did it

Hopefully that was for your withheld tax amount, and not your RMD amount!