Missed your quarterly estimates this year? You’re not alone. The IRS underpayment charge is nondeductible, compounds daily, and snowballs fast. Writing a big check today will stop new penalty accrual from this point forward, but it won’t erase the penalties tied to the quarters you already missed.

There is, however, a lawful way to make it as if you paid each quarter on time. It relies on how the tax code treats withholding from retirement distributions. 

The Core Idea

Tax withheld from certain retirement-plan distributions is treated as if it were paid evenly throughout the tax year, regardless of when you actually withhold. That timing rule lets you retro-allocate withholding to April/June/September/January and eliminate underpayment penalties for earlier quarters.

You can use that rule in two primary ways.

Method 1: The 60-Day Rollover With Withholding (All Ages)

How it works

• Take a distribution from an eligible retirement account and instruct the custodian to withhold enough federal income tax to cover your full-year estimated-tax need.
• Within 60 days, redeposit the gross amount of the distribution back into an eligible account (a tax-free rollover).
• Result: the withholding is deemed paid ratably across the four due dates, which erases the underpayment penalties. The completed rollover prevents the distribution from being taxable (and avoids early-withdrawal penalties where applicable).

Example (simplified)

You were supposed to pay four estimates of $25,000 and paid none by April 15, June 15, or September 15. In October, you instruct your IRA custodian to distribute $100,000 and withhold $100,000 to the IRS. Within 60 days, you redeposit $100,000 from your brokerage account back into the IRA.