1. Home
  2. Taxes General Forum
  3. How do I make an estimated payment due to a windfall?

How do I make an estimated payment due to a windfall?

Hello,

As one of a few heirs, I will be receiving a 'windfall' this year from a deceased relative's IRAs, originally held by the decedant, and never placed in her trust. After death, the executor/trustee sucessfully petitioned (Hegstaff) to have the IRAs placed in the decedant's trust. The trust will make IRA fund distributions over the next five years, the first by the end of 214.

I will receive a check.

Questions:

1) Do I assume this will be reported as ordinary income?

2) How do I make an estimated tax payment now, so that I don't get a penalty for underwithholding?

TIA

Reply to
Boris
Loading thread data ...

Seems likely.

If you get the check in the fourth quarter of 2014, you make your estimated payment by January 15, as usual.

When you file your taxes, include Form 2210 and fill out its Schedule AI (for Annualized Income) to show that you got that large chunk of income in 4q2014 so the Jan 15 payment was timely. The instructions are tedious but not difficult.

Bonus method: if you have income subject to withholding, tell your employer to crank up the withholding for the rest of the year. For some reason, withheld tax is treated as paid evenly over the year even if it isn't.

Reply to
John Levine

IRA's generally are not placed in an estate planning trust. In fact I don't think an IRA can be owned by a trust. However the trust can be made the beneficiary of the IRA, though that is not always the best idea.

Do you mean a Hegstad petition? That's used in California. Unless the trust was drafted properly with an eye toward passing money that came from an IRA, that might not have been a good idea.

If the IRA had been distributed directly to the beneficiaries rather than going to the trust, the beneficiaries could have taken out the money on their schedules, as long as they withdrew the required minimum distribution (RMD) each year, based on actuarial values.

It is ordinary income. Either the trust pays the tax or you do. The trust should issue you a Schedule K if you are to pay the tax.

Reply to
Stuart A. Bronstein

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.