dmertz
Level 15

Retirement tax questions

If annualizing is necessary to reduce an underpayment penalty, the entire lump-sum payment will be treated as income in the quarter that it is received and, generally, the entire estimated payment for the tax liability attributable the lump-sum distribution would also need to be paid by the due date for the tax quarter in which the distribution was received, otherwise there can be an underpayment penalty.