WisconsinWhat is the name of your state?
OP got the money in 2018. Too late for that. But good advice if OP is expecting or contemplating a large RMD in 2019.Make estimated tax payments in the amount that you think your tax liability will be
You don't avoid it. But you can mitigate it somewhat by computing the penalty the regular way and the annualized way to see which way is less painful. See Chapter 4 of Publication 505:I have recently received a substantial RMD from an inherited IRA. It will increase my tax liability 3X from 2018. How do I avoid paying a tax penalty in 2019 by under-withholding for federal
THen you need to follow FlyingRon's advice above.Then an in May 2019 I received large RMD. It will triple my 2019 tax liability.
OK. Thanks. I will try to track down info for WisconsIn requirements.THen you need to follow FlyingRon's advice above.
Thank you all for your help. Greatly appreciated.Wisconsin has the same rules. File estimated tax. They have similar safe-harbor provisions to the feds as well.
On a long term basis, you should have enough withholding coming out of your annual RMD to cover whatever tax results from the RMD. Any tax professional can estimate that for you.Greetings:
I have recently received a substantial RMD from an inherited IRA. It will increase my tax liability 3X from 2018. How do I avoid paying a tax penalty in 2019 by under-withholding for federal (and state) income tax?
If you haven't already spent the money the safe bet is to send 20% of it to the IRS right now, or whatever percentage is commensurate with your expected tax liability. Ditto the appropriate percentage to the state.Then an in May 2019 I received large RMD. It will triple my 2019 tax liability.
Any tax professional can also provide a reasonable estimate of how much the OP should pay in estimated taxes as well. Its ok to make an estimated payment now. One is not limited to just the quarterly time frames.If you haven't already spent the money the safe bet is to send 20% of it to the IRS right now, or whatever percentage is commensurate with your expected tax liability. Ditto the appropriate percentage to the state.
Otherwise, you'll have two more opportunities to pay estimated tax and try to avoid or minimize the penalty. One is due by Sept 16 and the next is due by Jan 16.
https://www.irs.gov/pub/irs-pdf/f1040es.pdf