Should you withhold taxes from your IRA cash distribution? | Guideline Help Center (2024)

If you take a cash distribution from your IRA, you’ll have to pay income taxes on the taxable amount you withdraw unless you subsequently indirectly roll that money into another IRA or qualified plan.
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In most cases, IRA cash distributions are subject to a default 10% federal withholding rate. However, the 10% rate may not be suitable for your tax situation. In that case, you have the option of choosing to have a higher rate withheld or to waive withholding altogether.
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Regardless of your tax withholding election, your IRA distribution will be reported to the IRS on Form 1099-R.
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Applying withholding to your IRA distribution is a prepayment of income taxes. The amount withheld will count as a credit toward your overall tax liability for the year. If too little tax is withheld, the IRS may assess penalties for underpayment.
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If you have any questions on federal or state withholding related to your IRA distribution, it is best to consult with your tax advisor.
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There are some cases where withholding will be required. For instance, certain states have minimum mandatory requirements for IRA distributions.
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In addition, you cannot choose less than 10% federal withholding on any IRA distributions that are delivered outside the US. If you are a nonresident alien, you may be subject to a mandatory withholding rate of 30% unless you submit a properly completed W-8BEN and a valid tax treaty rate or exemption exists between the US and your country of residence.
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You will be prompted to make a withholding election when you request a cash distribution. This is because distributions of pre-tax amounts from your traditional IRA and SEP IRA are generally subject to income tax, unless the amount is rolled over into another qualified retirement account.
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While your Roth IRA contributions are considered after-tax amounts, certain distributions that include earnings, may be taxable if they are non-qualified.
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Learn more about the forms you may need to file with the IRS here.
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​This article is for informational purposes only and is not intended to be construed as tax advice. You should consult a professional tax advisor to determine a strategy that fits your needs.

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