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The actual tax due can't be determined until you file your taxes at the end of the year and figure out what tax bracket you're in. So the 20% withholding is merely a down payment against your future tax bill. But if you think 20% is a good number, and want to add another 10% to cover the penalty I suggest you ask your IRA custodian whether they can withhold 30% rather than the usual 20%. If they can't do that for you, one option would be when you receive the distribution to immediately send 10% of the distribution amount ($4500) to the IRS as an estimated tax payment. That way you won't accidentally spend it and come up short next April. |
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