Income Tax Withholding on RMDs

Q. My company is distributing required minimum distributions (RMDs) to my client, and is withholding 20% of the amounts being distributed, despite the fact that my client elected “no withholding.” The company has told my client that it is mandatory that 20% in federal income tax be withheld on the RMDs. Is that correct?

A. No, that is not correct! The 20% mandatory federal tax withholding applies only to distributions that are eligible to be rolled over. Since RMDs can never be rolled over, there is no federal tax withholding required.