Got the call from my accountant this morning.

I owe quite a bit on my state taxes, but am getting a refund on my federal.

I took a distribution from my 401k during 2025 as my income for 2026. I had them withhold federal taxes, which my estimate was pretty close on. However, there was no option to withhold state taxes.

We will review the return and have a session this summer on tax issues based on this year. His initial comment was to just account for 5% withholding in the distribution or as a payment later so you're not surprised. I can't remember the last time I owed state taxes, but I guess work always withheld something.

 

We are both of the age where we have to do Required Minimum Distributions (RMDs).

We have the option to withhold both federal and state taxes.

We have all of our RMDs set up to withhold 25% federal and 5% state taxes.

 

I'm not quite there yet. My plan for the next few years is in addition to my normal distribution to live on, take another distribution within the same tax bracket and move into a Roth. I should have plenty of time to make up the tax hit I pay now. As I get older, that may change.

 

I got my taxes back from the accountant on Thursday and I am not having enough withheld from my RMD’s. I’m going to have to make some changes so I don’t have such a big tax bill next year.