One December Move Erases a Year of Missed Estimated Taxes: The IRS Treats RMD Withholding as Paid On Time, All Year Long.

In the latest tax strategy for retirees, a December Required Minimum Distribution (RMD) can erase a full year of missed estimated taxes. The IRS treats federal tax withheld from an RMD as if it were paid evenly across all four quarters, making a single December distribution sufficient to cover the entire year. Retirees should withhold enough to cover 100% of last year's tax liability, or 110% if their adjusted gross income exceeded $150,000.

The deadline for processing large December RMDs is mid-December, not December 31, as custodians may need one to three weeks to complete the processing. Financial professionals are salespeople, not fiduciaries, who must prioritize clients' interests. The SEC requires fiduciaries to put clients' interests first. This tax opportunity is particularly relevant in the current environment, with higher 10-year Treasury yields increasing underpayment interest costs and a declining personal savings rate.

Advisor.com offers a free matching tool to connect retirees with vetted fiduciaries. Estimated tax payments are credited on the date they are made, and withholding counts toward the safe harbor thresholds: 90% of the current year's tax liability, 100% of the prior year's tax liability, or 110% if the prior year's AGI exceeded $150,000.

Retirees can calculate their RMD using their previous year's Form 1040 and deposit the remaining balance into a checking or taxable brokerage account.