minimum distribution question

[James Matt Ullakko]

Question about minimum distributions:

Assume participant is required to take minimum distribution withdrawals for this year. Can this individual waive or modify the federal and or state tax withholding? Also, withholding refresher would be appreciated - rollover eligible drives all of the tax withholding options on distributions, yes?

Many thanks,

Matt

[BG5150]

In my experience, the Federal withholding portion is correct. I am not sure about State.

[david rigby]

The 20% withholding applies to distributions that are eligible for rollover. RMD are not rollable.

Here is the 2007 form W-4P:

http://www.irs.gov/pub/irs-pdf/fw4p.pdf

[Appleby]

So the participant can waive withholding on amounts up to the RMD amount for the year. Any amount in excess of the RMD will be subject to the mandatory 20% w/h, unless the amount is processed as a direct rollover.

For state tax withholding, the rule vary by state. But in general, where federal tax is not withheld, State withholding does not apply.

[david rigby]

...in general, where federal tax is not withheld, State withholding does not apply.

That may be too much generalization. No guarantee that this is up-to-date:

http://www.prudential.com/media/managed/St...Withholding.pdf

[Appleby]

You are right David. What I should have said is…in general, where federal tax is not withheld, State tax withholding is not ‘required’.