Q. To clarify, my income in 2025 will be primarily from Social Security, and distributions from my IRA. Will using Schedule AI have any effect on my federal taxes as well?
A. Simple answer: No. The feds have a separate, but similar form 2210. But it's not needed in your case.
Withholding is not the same as estimated payments. In particular, federal withholding is treated as having been paid evenly throughout the year. So, when you have federal income tax withheld from your lump sum IRA distribution, your are protected from a potential underpayment penalty.
I'm am not specifically familiar with CO rules, but some states do not have a similar rule. A quick reading of the CO rules (https://tax.colorado.gov/individual-income-tax-guide) seems to indicate that CO does not.
But, if you have the IRA administrator withhold CO tax, at the time of the distribution, the "annualized income" rules should protect you from the underpayment penalty, even if you didn't do quarterly payments. At the time you file your taxes, TurboTax (TT) will prepare Schedule AI (annualized Income) of form 2210 to claim the penalty exception. It is not automatic. You will be asked at the "Other tax situations" section of the program, if you want to file that form.
