I received a Schedule K-1 in 3/2017 for an inheritance I received in 9/2016. It turns out that the estate had an annuity resulting in a considerable amount of income in 2016 of which I am paying a share per the Schedule K-1. This increased my taxes owned to Feds and state about $5K and $2K, respectively, and triggered penalties of $10 and $35, respectively. It does not seem fair that I should be penalized for unexpected beneficiary income on this Schedule K-1. I was reading that I could have avoided this by paying 100% of estimated taxes paid in 2015, but I do not pay an estimate and instead have additional money taken from my salary per a W-4. I noticed that I made slightly less in 2016 vs. 2015, so consequently, my taxes would have been less. Is this where I went wrong? How could I have avoided the penalties?
