When Do You Pay Taxes on IRA Withdrawals? Timing and Penalties

You pay federal income tax on an IRA withdrawal for the calendar year you receive the money, and the balance is due when you file your Form 1040 by April 15 of the following year. Most people don’t wait that long in practice: taxes are either withheld from the distribution itself or paid in quarterly installments during the year. When you owe, how much you owe, and whether a 10% penalty gets added depend on the type of IRA, your age, and how long the account has been open.

The Year the Tax Attaches

Tax liability follows the calendar year you actually receive the distribution, not the year you requested it. A withdrawal taken in October 2026 lands on your 2026 return, even if the paperwork was submitted earlier. Your IRA custodian reports the payout to you and the IRS on Form 1099-R, with the gross amount in Box 1 and the taxable portion in Box 2a.¹

You settle up on Form 1040 by April 15 of the year after the distribution. If April 15 falls on a weekend or legal holiday, the deadline shifts to the next business day.² Miss the payment deadline and the IRS adds a failure-to-pay penalty of 0.5% per month on the unpaid balance, capped at 25%.³

Paying During the Year: Withholding and Estimates

The IRS expects tax on an IRA distribution to be paid as you go, not in one lump the following April. You have two ways to do that.

Withholding From the Distribution

The default federal withholding rate on a non-periodic IRA distribution is 10% of the taxable amount. You can raise or lower that rate, anywhere from 0% to 100%, by submitting Form W-4R to your custodian.⁴ Many states withhold a separate percentage for state income tax.

Withholding has a timing advantage worth knowing. The IRS treats withheld amounts as if they were paid evenly across the four quarters, even when the entire withdrawal happened in December.⁵ Withholding heavily from a late-year distribution can plug earlier quarters where you made no payments and avoid an underpayment penalty.

Quarterly Estimated Payments

If you skip withholding, you may need to send quarterly estimated payments using Form 1040-ES. The deadlines are April 15, June 15, September 15, and January 15 of the following year.⁶ You generally avoid an underpayment penalty if your total payments for the year cover the smaller of 90% of your current-year tax or 100% of the prior-year tax. If your prior-year adjusted gross income was more than $150,000 ($75,000 if married filing separately), that prior-year safe harbor rises to 110%.⁷

For a one-time large withdrawal, the annualized income installment method lets you match estimated payments to the quarter when the income actually arrived rather than spreading the obligation across the year. The calculation lives on Schedule AI of Form 2210.⁸

Traditional IRA Withdrawals

Because most traditional IRA contributions were deducted from taxable income going in, the IRS taxes every dollar coming out as ordinary income in the year you receive it. A large withdrawal can push you into a higher bracket for that year, which is why some retirees split a planned distribution across two calendar years.

Not every dollar in a traditional IRA was necessarily deducted. If your income was too high to deduct contributions, or you chose not to deduct them, part of each withdrawal is a return of already-taxed money. You track that basis on Form 8606, which calculates the tax-free portion using the ratio of your total nondeductible contributions to the combined balance of all your traditional IRAs.⁹ You cannot cherry-pick the after-tax dollars; every distribution is treated as a proportional mix of pre-tax and after-tax money.

The 10% Early Withdrawal Penalty

Take money from a traditional IRA before age 59½ and, on top of ordinary income tax, you owe a 10% additional tax on the taxable amount.¹⁰ It’s reported on Form 5329 and paid with your regular return for that year.¹¹

Several exceptions waive the 10% penalty while leaving the income tax in place:

Total and permanent disability.
First-time home purchase, up to $10,000 lifetime.
Qualified higher education expenses for you, your spouse, children, or grandchildren.
Unreimbursed medical expenses above 7.5% of adjusted gross income.
Health insurance premiums while unemployed, after at least 12 consecutive weeks of unemployment compensation.
A series of substantially equal periodic payments taken over your life expectancy (72(t) payments).
Birth or adoption, up to $5,000 per child.
Federally declared disaster losses, up to $22,000.
Domestic abuse victim withdrawals, up to the lesser of $10,000 or 50% of the account balance.
Distributions taken to satisfy an IRS levy on the account.
Certain distributions to qualified military reservists called to active duty.

The full list and qualifying conditions are maintained by the IRS.¹²

Roth IRA Withdrawals

Roth contributions were made with after-tax dollars, so you can withdraw your original contributions at any time, at any age, with no tax and no penalty. When you take a distribution, the IRS applies an ordering rule: contributions come out first, then conversion amounts (oldest first), and finally earnings.¹³

The Five-Year Rule for Earnings

Earnings come out completely tax-free only if the distribution is “qualified.” Two things must be true: the account has been open at least five tax years, and you’re 59½ or older (or meet another qualifying event such as disability, death, or a first-time home purchase up to $10,000).¹⁴ The five-year clock starts January 1 of the tax year of your first Roth contribution. Contribute for tax year 2023 anytime before the April 2024 filing deadline and the clock started January 1, 2023, running through December 31, 2027.

Withdraw earnings before meeting both requirements and those earnings are taxed as ordinary income, plus the 10% early withdrawal penalty if you’re under 59½.¹³

A Separate Clock for Conversions

Each Roth conversion carries its own five-year holding period for penalty purposes, starting January 1 of the conversion year. Pull the converted amount out before turning 59½ and before that conversion’s five years are up, and you owe the 10% penalty on the pre-tax portion that was converted, even though income tax was already paid at conversion. After 59½ the conversion penalty falls away, but the general five-year rule still governs whether earnings come out tax-free.

Required Minimum Distributions

Traditional IRAs cannot be deferred forever. Under current rules the required minimum distribution age is 73, rising to 75 starting in 2033.¹⁵

Your very first RMD can be delayed until April 1 of the year after you turn 73. Every RMD after that is due by December 31. Delaying the first one creates a common trap: push it into the following year and you still owe that year’s regular RMD by December 31, so two distributions land in a single tax year and can push you into a higher bracket.

Miss an RMD deadline and the excise tax is 25% of the shortfall.¹⁶ Correct the mistake by pulling out the missed amount before the end of the second year following the shortfall and the penalty drops to 10%.

Roth IRAs have no RMDs during the owner’s lifetime.¹⁵

The 60-Day Rollover Deadline

A direct trustee-to-trustee transfer between IRAs has no tax impact. But if your custodian sends the distribution check to you, you have exactly 60 days to deposit the full amount into another qualifying retirement account. Miss the deadline and the whole distribution becomes taxable income for that year, plus the 10% early withdrawal penalty if you’re under 59½.¹⁷

There’s a wrinkle. Your custodian withholds 10% for federal taxes before cutting the check. To roll over the full original amount, you have to make up that 10% out of other funds within the 60 days. Any withheld amount you don’t replace is treated as a taxable distribution.

If you miss the 60-day window through circumstances beyond your control, such as a serious illness, postal error, or financial institution mistake, the IRS allows self-certification under Revenue Procedure 2016-47. You give the receiving institution a model letter and no IRS fee is charged, though the IRS can still challenge eligibility on audit.¹⁸

If You Inherited the IRA

When the account isn’t originally yours, the tax timing depends on your relationship to the decedent.

A surviving spouse can roll the inherited IRA into their own IRA and treat it as if it had always been theirs, including waiting until age 73 to start RMDs. A spouse can also keep it as an inherited IRA and take distributions based on their own life expectancy.¹⁹

Most non-spouse beneficiaries who inherited from someone who died in 2020 or later must empty the account by December 31 of the 10th year after the owner’s death. If the original owner had already begun RMDs, the beneficiary also has to take annual distributions during those 10 years based on their own life expectancy, not just a lump sum in year 10. Each payment is taxed as ordinary income in the year received.¹⁹ A narrower group of eligible designated beneficiaries, including the owner’s minor children, disabled or chronically ill individuals, and people no more than 10 years younger than the owner, can still stretch distributions over their own life expectancy.

Watch the Downstream Costs of a Large Withdrawal

A big IRA distribution can raise your tax bill in ways that don’t show up as tax. Distributions count toward modified adjusted gross income, and Medicare uses your MAGI from two years earlier to set current premiums. For 2026 the standard Part B premium is $202.90 per month, with Income-Related Monthly Adjustment Amount surcharges starting at individual income above $109,000 (or $218,000 for joint filers) and rising to $487.00 per month for individuals above $500,000.²⁰ A large 2026 withdrawal affects 2028 premiums. Roth withdrawals don’t count toward MAGI for IRMAA.

The same MAGI figure feeds the 3.8% Net Investment Income Tax. The IRA distribution itself isn’t investment income, but pushing MAGI over the threshold ($200,000 single, $250,000 married filing jointly, not indexed for inflation) causes the 3.8% tax to apply to your other investment income such as capital gains, dividends, and rental income.²¹

State Income Tax

Federal tax is only part of the bill. Most states tax traditional IRA distributions as ordinary income, but the rules vary widely. Some states impose no personal income tax; others offer partial retirement-income exclusions limited by age or dollar cap; a handful tax IRA withdrawals at the full wage rate. If you’re weighing a move in retirement, the destination state’s treatment of retirement income can noticeably change how much of each withdrawal you keep.

1
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2
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3
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4
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14
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15
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17
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