I’m talking about 20% being withheld from anything I withdraw from my retirement IRA. I’m over 65 so I would like to know how I don’t have this percentage taken out when I get money.
At age 65 and up to 70 ½ , I think that regular or periodic distributions from your Traditional IRA are considered a “normal distribution” and are subject to ordinary income taxes. Prior to age 59 ½ it is an early withdrawal and subject to both income tax and the 10% early withdrawal penalty however if you are over the age of 70 ½ there are required minimum distributions and there are penalties for not taking regular distributions.
Check this out:
IRA distributions 59 1/2 to 70 1/2
Withholding from IRA distributions
Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. Generally, tax is withheld at a 10 percent rate. If you receive an annuity or similar periodic payment, tax withheld is based on your marital status and the number of withholding allowances you claim on your withholding certificate (Form W-4P).
And
20% sounds like too much but I can’t say for sure. Are your distributions an annuity and did you ever file a form W-4P with the financial institution where your IRA is located when you first started taking distributions?
I would first contact their customer service department and ask them how they are arriving at a 20% withholding rate and ask them how to submit an updated form W-4P to change your withholding and or not have any tax withheld on future distributions assuming that you qualify and that is what you want.
I can’t say for sure as I’m not an expert in this area, but if you have been over withheld in past years, I would think that you may be entitled to a refund of over payment in taxes presuming you are still filing income tax returns. If you haven’t filed income tax returns in those years since you retired and since you started taking distributions from your IRA because you were not required to file returns because of your income level, I would suggest next contacting the IRS to see if you can’t file now for those years in order to claim any refund you may be entitled to (and the IRS is not always the bad guy, and they can actually be very helpful sometimes, explain your situation and or even visit your local IRS office) or you might also think about consulting with a CPA or if you can’t afford that, try contacting your local senior center or if you belong to a church or other civic association or club, inquire if there are any free or discounted services available to you.
Good luck and let me know what you find out.