The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Re: Estimated Taxes Date:  2/16/2000  11:07 PM
Author:  edcosoft Number:  28963 of 127753

In 2000 we will be recipients of a large annuity due to the death
of my wifes father, which we intend to take as a lump sum
distribution (our combined income is sufficiently large that there
is minimal advantage to taking a five year payout). This
distribution will cause our 2000 AGI to be about the same as for
1999, so our normal withholding will not cover the taxes due for
2000. Do we have to pay estimated taxes in 2000? Since the
reason for the spike in our income is different for the two years,
are they treated as unrelated events?

You could have a single (or multiple) overwithholding in December to make up the difference--that defers the tax the most. The annuity will probably have 20% withholding which will solve part of your problem. If you make an estimated payment, it must be at the end of the quarter when you get the annuity to avoid a penalty, and then you have to complete Form 2210 and Schedule AI.
As an aside does the Annuity qualify for a 4972 Lump Sum Distribution? If so 10 year averaging may create less tax than including it in your ordinary income. Check out 4972 instructions.
Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us