Fix Missed Freelance Estimated Taxes in December With IRA Withholding (Form W-4R, RMDs and the 2026 Penalty Rules)

Published: October 28, 2026 · Reading time: 10 min

TL;DR: Miss a couple of quarterly estimated payments and a big January 15 catch-up payment will not erase the penalty for the earlier quarters. Tax withheld from a retirement distribution is treated differently: unless you prove the real dates, the IRS treats withheld tax as paid in four equal slices on the four due dates. If you have an IRA withdrawal coming in December (a required minimum distribution is the cleanest case), a Form W-4R rate of up to 100% can send the shortfall to the IRS and have it credited back to April. It only works if the money is withheld by December 31, 2026, it raises your taxable income, and it can carry a 10% additional tax if you are under age 59 and a half and no exception applies. This is a planning idea to run past a CPA or EA, not a default.

It is late October, you are reading a post about estimated taxes, and there is a decent chance you skipped one or two payments this year. Maybe a big client paid late. Maybe you meant to pay in September and the month got away.

The usual advice is "pay now, and the penalty stops growing." That is true, but it leaves the penalty for the quarters you already missed. There is one December move that works differently, and it only exists if you have a traditional IRA to draw on. This guide covers how it works, who it fits, and where it breaks.

Why a late payment does not erase the missed quarters

The penalty is not a single yearly test. The Instructions for Form 2210 (we checked the 2025 edition) put it plainly:

"Therefore, you may owe the penalty for an earlier due date even if you paid enough tax later to make up the underpayment."

They also say the money goes to the oldest hole first:

"Your payments are applied first to any underpayment balance on an earlier installment even if you designate a payment for a later period."

So a $13,500 payment on January 15 does not retroactively become three on-time payments. It stops the clock on each missed installment the day it arrives. Our guide to the Form 2210 penalty walks through the mechanics, and the annualized income method is the other tool when your income was lumpy.

Publication 505 says the same thing about the January shortcut. If you file your 2026 return by the end of January 2027 and pay the balance, you can skip the fourth installment, but:

"However, you may owe a penalty for not making the first three estimated tax payments, if required."

We cover that route in skipping the January 15 payment. It helps the fourth quarter only.

The exception: withheld tax is spread across the year

Section 6654(g)(1) of the Internal Revenue Code is the rule behind every "just raise your withholding" tip:

"the amount of the credit allowed under section 31 for the taxable year shall be deemed a payment of estimated tax, and an equal part of such amount shall be deemed paid on each due date for such taxable year, unless the taxpayer establishes the dates on which all amounts were actually withheld"

The Form 2210 instructions repeat it in plain words:

"For withheld federal income tax and excess social security or tier 1 RRTA, you are considered to have paid one-fourth of these amounts on each payment due date unless you can show otherwise."

Most freelancers meet this rule through a W-2 job or a spouse's paycheck, which our post on increasing W-2 withholding covers. Retirees who freelance can use Form W-4V on Social Security benefits. This post is about the third source nobody mentions: your IRA.

Does it apply to IRA withholding?

Here is the chain, link by link, so you can check it with your preparer:

1. Section 3405(e)(1) defines a "designated distribution" to include a distribution from "an individual retirement plan," and section 3405(b)(1) requires the payor of a nonperiodic distribution to "withhold from such distribution an amount equal to 10 percent of such distribution."
2. Section 3405 is in chapter 24, and section 31(a)(1) says: "The amount withheld as tax under chapter 24 shall be allowed to the recipient of the income as a credit against the tax imposed by this subtitle."
3. Section 6654(g)(1), quoted above, treats that section 31 credit as estimated payments spread over the due dates.

That is the statute's text, not a sentence that says "IRA." The heading of section 6654(g) mentions tax withheld on wages, and the paragraph's wording is broader. We think the reading is sound and widely used, but treat it as something to confirm with a CPA or EA before you rely on it. Also note section 31(a)(2): the withholding counts for the year in which it was withheld.

"The amount so withheld during any calendar year shall be allowed as a credit for the taxable year beginning in such calendar year."

For 2026, that means the money has to leave the IRA with tax withheld by December 31, 2026. A January 2027 distribution counts for 2027.

How Form W-4R sets the rate

Form W-4R is the withholding certificate for nonperiodic IRA payments. Publication 505 describes the choices:

"Tax will be withheld at a flat 10% rate on any nonperiodic payments you receive, unless you choose a different withholding rate. Use Form W-4R, line 2, to choose a withholding rate other than the default 10% rate. You can choose a rate between 0% and 100%."

The 2026 form asks you to "Enter the rate as a whole number (no decimals)." Publication 590-B confirms the form applies to IRAs: "Complete Form W-4R to have taxes withheld from your nonperiodic payments or eligible rollover distribution from your IRA."

That 100% ceiling is the useful part. Withholding on wages is capped by your paycheck. Withholding on a retirement payout can take nearly all of it if you ask.

Who this fits (and who should skip it)

On the RMD timing, Publication 590-B says: "The required minimum distribution for any year after the year you reach age 73 must be made by December 31 of that later year." The same publication explains that if you reach age 72 after December 31, 2022, the first one is due by April 1 of the year after you reach 73. Publication 590-B names age 73, and your required beginning date may be later depending on your birth year, so confirm yours. A missed RMD can bring a 25% excise tax, so this idea never replaces taking the distribution.

Publication 590-B also says RMD amounts "aren't eligible for rollover treatment." That matters in the next section, because it rules out the rollover variation for an RMD. Publication 505 lists "Distributions required by federal law, such as required minimum distributions" among payments that are not eligible rollover distributions for the withholding rules, so a December RMD defaults to the 10% rate, and you can raise it.

For the under-59-and-a-half warning, Publication 590-B says: "Generally, if you are under age 59½, you must pay a 10% additional tax on the distribution of any assets (money or other property) from your traditional IRA." It adds that the tax "applies to the part of the distribution that you have to include in gross income." Publication 590-A's rollover comparison table is more pointed: the tax "may apply to the taxable part (including an amount equal to the tax withheld) that isn't rolled over." Some exceptions exist. Ask a CPA or EA before you assume one applies.

A worked example: Maria, age 74

Maria is a 74-year-old freelance editor who also has a traditional IRA. These facts are assumptions for the example:

• Her 2025 return covered 12 months and showed $18,000 of total tax on $96,000 of AGI, which is below the $150,000 line, so the prior-year safe harbor is 100%.
• Her preparer expects $24,000 of total 2026 tax, including self-employment tax and the tax on her IRA payout.
• She paid $4,500 on April 15, then stopped.
• She has not yet taken her $30,000 2026 RMD.

Publication 505 says you generally need payments of at least "the smaller of: 90% of the tax to be shown on your 2026 tax return, or 100% of the tax shown on your 2025 tax return." Here that is the smaller of $21,600 and $18,000, so the required annual payment is $18,000, or $4,500 per installment.

She has two ways to put $13,500 more toward the year:

Under the withholding route, her credited totals line up like this:

Every installment is covered, and the final one lands exactly at the safe harbor. She still owes $6,000 with her return, because the safe harbor is about avoiding the penalty, not about paying the whole bill.

Two honest notes about those numbers. The penalty line uses a flat 7% on the 214-day and 122-day shortfalls (1,512,000 dollar-days divided by 365, times 0.07) only to size the difference. The actual underpayment rate changes by quarter, and Form 2210 computes the real figure. And the savings are modest: about $290 here. The same move scales with the size of the shortfall, and it is nearly free for someone who is taking the RMD regardless.

The cost is not the tax. She owed that either way. The cost is flexibility: $13,500 goes to the IRS in December instead of staying in her account until January, and it cannot be pulled back before she files.

How to size your own W-4R rate

You need only three numbers:

1. Required annual payment, the smaller of 90% of 2026 tax or 100% of 2025 tax (110% if your 2025 AGI was more than $150,000, or $75,000 if married filing separately, per Publication 505).
2. What you have already paid, estimates plus any existing withholding.
3. The gross distribution you plan to take.

The rate is (required annual payment − payments so far) ÷ distribution, rounded up to a whole number. In Maria's case, ($18,000 − $4,500) ÷ $30,000 = 45%. If the answer is above 100%, the distribution is too small to cover the gap alone, and you would combine it with a regular estimated payment.

The tax on the distribution itself is part of your 2026 tax, which is why her $24,000 estimate includes it. Do not treat the withheld amount as extra tax on top. It is a payment toward the total.

Since the penalty looks at your total tax, this works for the self-employment tax piece too. Publication 505 states: "Estimated tax is used to pay both income tax and self-employment tax." Our safe harbor guide covers the thresholds in more depth.

The 60-day rollover variation (advanced, ask a CPA or EA)

People who are not at RMD age sometimes ask whether they can take an IRA withdrawal, have tax withheld, and then return the money. The facts that matter:

• Publication 590-A says you must generally make the rollover contribution "by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan."
• It also says that "you can't, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA." The one-rollover-per-year rule is real, and Publication 590-A says it applies "regardless of the number of IRAs you own," aggregating all of your IRAs (traditional, Roth or SIMPLE) as if they were one, so a rollover from a different IRA earlier in the year counts too.
• To the extent a distribution is rolled over, it "isn't includible in your income."
• For employer plan distributions, Publication 590-A says the amount withheld counts as part of the distribution, and that "you can make up the amount withheld with funds from other sources."

If you replaced the withheld dollars from other funds, the whole distribution could be rolled over, and the withholding would still have been credited to your tax. Publication 590-A makes the "make up the amount withheld" point for employer plan distributions, and it does not walk through an IRA-to-IRA version. Whether it works for you depends on the rollover rules, your custodian's process and the Dec 31 timing. It cannot be used for an RMD. Treat it as a conversation with a professional, not a plan to run alone.

How the December options compare

Whichever route you pick, you still need a way to pay any remaining balance. Our guide to paying estimated taxes by Direct Pay, card or check covers the mechanics.

What can go wrong

• Timing. Custodians have year-end cutoffs for processing. Submit the W-4R and request the payout early in December, not on December 28. A payout that settles in January belongs to 2027.
• Over-withholding. Excess withholding is refunded only after you file. If your income dropped late in the year, reduce the rate before you submit.
• Extra income. An RMD is income you must take anyway. A voluntary distribution is new income that can raise your tax and other income-based items. See our post on Roth conversions in a low-income year for a related year-end trade-off.
• Charitable giving. If you plan to satisfy part of the RMD with a qualified charitable distribution, Publication 590-B notes that "A QCD will count towards your required minimum distribution." Withhold only on the taxable portion.
• State tax. State withholding on retirement payouts follows separate state rules. Check your state's form.
• Documentation. Keep the W-4R confirmation and check the Form 1099-R next January for the withholding that was reported.

Doing it in five steps

1. Compute your required annual payment with the 90% / 100% (or 110%) test and divide by four.
2. Total what you have paid and subtract it to get the gap.
3. Confirm which distribution to use, starting with any unpaid RMD, and avoid early distributions.
4. Divide the gap by the gross distribution and round up to a whole percentage.
5. Submit Form W-4R early in December and keep the confirmation.

Frequently Asked Questions

Can tax withheld from an IRA distribution fix missed quarterly estimated payments?

It can, if the withholding happens in 2026 and your total payments reach a safe harbor. Section 6654(g)(1) deems the credit for withheld tax a payment of estimated tax, with an equal part deemed paid on each due date unless the taxpayer establishes the dates on which all amounts were actually withheld, and the Form 2210 instructions say you are considered to have paid one-fourth of withheld tax on each payment due date unless you can show otherwise. So a December withholding can be credited back to April. The catch is that the distribution is taxable income, a 10% additional tax can apply if you are under age 59 and a half, and the withholding cannot be undone once it is sent to the IRS. Confirm the numbers with a CPA or EA before you set the rate.

Is IRA withholding treated as paid evenly through the year, like paycheck withholding?

On the statute's text, yes. Section 6654(g)(1) speaks of the credit allowed under section 31, section 31(a)(1) allows a credit for the amount withheld as tax under chapter 24, and section 3405, which covers withholding on distributions from an individual retirement plan, sits in chapter 24. The Form 2210 instructions also treat withheld federal income tax as paid one-fourth on each due date unless you can show otherwise. The heading of section 6654(g) mentions wages, so this is a reading of the statute's chain rather than a sentence that names IRAs. Ask a CPA or EA to confirm it for your return, and note that the withholding must occur in the tax year you are fixing.

What withholding rate can I choose on Form W-4R?

Publication 505 says tax is withheld at a flat 10% rate on nonperiodic payments unless you choose a different rate, and that you can choose a rate between 0% and 100% on line 2 of Form W-4R. The 2026 form asks for the rate as a whole number with no decimals. Required minimum distributions are not eligible rollover distributions for these withholding rules, so a December RMD uses the 10% default unless you choose otherwise. Distributions from an employer plan that are eligible rollover distributions have a 20% minimum rate instead. Your custodian may have its own version of the form, so ask how it takes the election and by what date in December.

Does this work if I am under 59 and a half?

Usually not well. Publication 590-B says that if you are under age 59 and a half you must pay a 10% additional tax on the distribution of any assets from a traditional IRA, and that the tax applies to the part of the distribution you must include in gross income. Publication 590-A says the taxable part includes an amount equal to the tax withheld if it is not rolled over. So you would owe the extra 10% on the withheld dollars too, unless an exception applies. Do not take an early distribution just to create withholding, and ask a CPA or EA about exceptions and the 60-day rollover variation.

Can I use my required minimum distribution (RMD) this way?

Yes, and it is the cleanest fit, because you must take the RMD anyway. Publication 590-B says the required minimum distribution for a year after the year you reach age 73 must be made by December 31 of that later year, and a missed amount can draw a 25% excise tax. Taking it in December with a high W-4R rate lets the withholding cover your freelance tax shortfall. Publication 590-B names age 73; check with a CPA or EA whether your birth year puts your required beginning date later. A qualified charitable distribution counts toward your RMD but is a direct payment to charity, so the part you send to charity has no taxable payout to withhold from, and RMD amounts cannot be rolled over.

Does IRA withholding cover self-employment tax and meet the safe harbor?

Withholding is a payment against your total tax, which for the penalty includes self-employment tax, and Publication 505 says estimated tax is used to pay both income tax and self-employment tax. You avoid the penalty when total payments reach the smaller of 90% of your 2026 tax or 100% of your 2025 tax, and the 100% becomes 110% if your 2025 adjusted gross income was more than $150,000 ($75,000 if married filing separately). Your 2025 return must also have covered 12 months. If you are close to a threshold, a CPA or EA should run the Form 2210 numbers.

Is this better than paying the January 15, 2027 estimate or filing early?

For a missed April, June or September payment, usually yes. The Form 2210 instructions say the penalty is figured separately for each installment due date, so you may owe the penalty for an earlier due date even if you paid enough tax later, and that payments are applied first to the earliest underpayment. Publication 505 says that if you file your 2026 return by January 31, 2027 and pay the rest of the tax you owe, you do not need to make the payment due January 15, 2027, but you may still owe a penalty for not making the first three. Withholding is the one December move that is credited back to earlier due dates, though only a CPA or EA can confirm it for your facts.

What are the risks of using IRA withholding to cover freelance tax?

Four. The distribution must be paid, with tax withheld, by December 31, 2026 to count for 2026, so ask your custodian about its December cutoff. The withholding cannot be reclaimed until you file, and an over-withheld amount comes back as a refund. A voluntary distribution beyond your RMD adds taxable income and can add the 10% additional tax if you are under 59 and a half. And state income tax withholding follows separate state rules. Ask a CPA or EA to model the year before you submit the form.

Authoritative References

• IRS: Publication 505, Tax Withholding and Estimated Tax (2026)
• IRS: Instructions for Form 2210, Underpayment of Estimated Tax by Individuals
• IRS: Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions
• IRS: Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)
• IRS: Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)
• Cornell LII: 26 U.S.C. 6654, Failure by individual to pay estimated income tax
• Cornell LII: 26 U.S.C. 31, Tax withheld on wages
• Cornell LII: 26 U.S.C. 3405, Special rules for pensions, annuities, and certain other deferred income

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This guide is general education for U.S. self-employed freelancers who also hold a traditional IRA, written for tax year 2026. It is not personalized tax advice. Whether tax withheld from an IRA distribution is credited evenly in your situation, whether you owe a required minimum distribution, whether the 10% additional tax or an exception applies, how to handle a rollover, and how your state treats the withholding all depend on your facts, so confirm them with a CPA or EA before you submit a Form W-4R. Quotations are taken from the IRS publications, form instructions and Code sections linked above; the Form 2210 instructions quoted are the 2025 edition and the Publication 590-A and 590-B editions are 2025, so check for later versions.